officewww

InternetVirtualMoneyUnderChinesepaymentEnvironmentandIt'sefficiencyanalysisHaishanTian,KuanhaiZhangPaymentandSettlementInstitute,SchoolofEconomicInformationEngineering,SouthwesternUniversityofFinanceandEconomics,St.
55Guanghuacun,Chengdu,P.
R.
China,Zipcode:610074,tianhs_t@swufe.
edu.
cn,zhangkh_t@swufe.
edu.
cnAbstract.
Thedevelopmentofe-Commerceneedssuitableonlineelectronic-paymentandsettlementarrangement.
InChina,mostonlinevirtualcommodityandserviceprovidersadoptanewpaymentandsettlementsolutionswhichisnamed"Webcoin"bythispaper.
InthispaperweanalyzetheChina'sonlineandofflinepaymentenvironment,explainthereasonwhytheWebcoincomeintobeingnow,givethedefinitionoftheWebcoin,presenttheWebcoin'scharacteristics,andintroducetheconceptofpaymentfrictioncoefficienttodiscusstheefficiencyoftheWebcoinasapaymentinstrumentonvirtualcommodityandservice.
1IntroductionAnewtypeofonlinepaymentmodehavebeenadoptedmoreandmorebymostonlinee-CommercecompaniesinChinasince2002[1],suchas"Qcoin"adoptedbyTencentCompany,"Ucoin"adoptedbySina.
com,andsoon.
InthispaperwecallallthiskindofpaymentmodeWebcoin.
ThismodeissuitabletothepaymentandsettlementenvironmentinChinanow,andfitsthecharacteristicsoftheonlineproductsespeciallythevirtualcommodityandservice.
BecauseoftheuseofWebcoin,theonlinecompaniesinChinasucceededinconqueringtheonlineflexiblepaymentproblemandmakehugeprofits[2].
What'sWebcoinHowcanitmakethisachievementWhydoesitemergeandgrowupinChinaThisarticleanalysesthepresentenvironmentofthepaymentandsettlementinChina,explaintheadvantageofWebcointobeonlinemicro-paymentforvirtualproperties,andthroughtheanalysisofthepaymentfrictioncoefficienttoshowtheimportanceoftheWebcointothevirtualcommodityandservice.
Pleaseusethefollowingformatwhencitingthischapter:Tian,H.
,Zhang,K.
,2007,inIFIPInternationalFederationforInformationProcessing,Volume251,IntegrationandInnovationOrienttoE-SocietyVolume!
,Wang,W.
(Eds),(Boston:Springer),pp.
107-114.
108InternetVirtualMoneyUnderChinesepaymentEnvironmentandIt'sefficiencyanalysisWebcoinisnotanelectronic-paymentproducts,itisamicro-paymentmodethatisusedtochargeintangiblegoodsonlineinChina'swebcompanies.
InChina,therearemanycompanieswhichhadbeenissuingtheirown"coin"whichcirculatedandwasusedforbuyingtheproductprovidedontheirownwebsites,i.
e.
the"Qcoin"issuedbyTencentcompany(www.
qq.
com)whichisaleadingInternetcompanyinChina,the"Baiducoin"byBaiducompany(www.
baidu.
com)whichisaleadingInternetsearchenginecompanyinChina,the"Ucoin"bySinacompany(www.
sina.
com.
cn)whichisaprimaryInternetportalinChina,the"santapointticket"bySantacompany(www.
santa.
com)whichisaleadingonlinegamecompanyinChina,the"starcoin"bySuperStarDigitalLibrary(www.
ssreader.
com)whichisaleadingonlinelibraryinChina.
CustomersbuytheInternetcompany's"digitalcash"throughlowercostpaymentinstrumentsorpaymentchannelssuchascash,bankcard,telephone,andInternetbar.
TheamountofmoneythattheypayforWebcoinisrecordedinaparticularvirtualaccountsetupbythecompany.
WhencustomerpurchasessomethingintheInternetcompany'sweb,thevalueofrelativevirtualaccountisdeducted.
Forexample,customerscangetthe"Qcoin"inbookstorebycash,andthentheycanbuythevirtualcommodityandserviceprovidedbyqq.
comusingthisaccount.
2TherelationshipbetweenthevirtualcommodityandserviceandpaymentenvironmentThevirtualcommodityandserviceisthoselowvalueintangiblegoodswhichisprovidebyInternetcompaniesforonlinecustomerssuchasonlinegames,thedownloadofphonering,thevideoandaudioproductsonline,thephotosandpicturesviewing,onlinebooksandmagazinesreading,onlineconsultancy,webshowlikeQQshow,webpetsbreeding,andsoon.
Themaincharacteristicofthoseproductsisthelowprice,thatisprobably0.
01centorevenlower,thesecondcharacteristicisthelargenumberofthevirtualcommodityandservicesthatcanbesharedbyallusers,thethirdoneisthelargenumberofpotentialcustomerswhoseageisyoungandtheirincomeislow,andthelastoneisthatthevalue-add-inofthoseproductsisverylarge;itcanbringlargeprofitstothosewebcompanies.
Ontheotherhand,thevirtualcommodityandserviceispuredigitalproduct,itcandistributetocustomersonline,andthecostoftransportationisverylow.
Undertheeffectofthenetworkexternalityandthezeromargincostofthoseproducts,themarketofthevirtualcommodityandserviceisverylarge[1].
Thekeyroleofthedevelopmentofthevirtualcommodityandserviceisthepaymentandsettlementarrangement.
Thepotentialhugenumberofcustomers,thelowerpriceoftheproductsandhighfrequencyofthepayments,alltheseneedalowcostandefficientwayforpayment.
ButtherearemanypaymentbarriersinonlineexchangeinChina,especiallyinvirtualgoodsonline,andthemicro-paymentalsoencountersthecostpitfall[5].
Therefore,itisveryimportanttofindaflexibleandcreativepaymentsystemthatissuitabletotheChinesee-Commerceandelectronicpaymentenvironment.
HaishanTian,KuanhaiZhang1093BackgroundofpaymentenvironmentinChinaThepaymentenvironmentinChinanowmainlyservesfortraditionaleconomy[6].
Thepaymentorganizationconsistsofcentralbanks,commercialbanksandotherfinancialorganizationswhichareengagedinclearingandsettlement.
ThepaymentsystemconsistsofRTGS(RealTimeGrossSystem)andDNS(DeferredNetSystem)whichinterconnectthebanksandotherpaymentandsettlementorganizations.
Thedetailpaymentsystemconsistsofbanks,postofficeandclearinghouse.
Thepaymentinstrumentsincludecheck,billexchange,casher'scheckandbankcard.
Thepaymentandsettlementenvironmentisdominatedbybanksandissuitabletotraditionaleconomy.
Itdoesnotsupporte-Commercefiilly.
Althoughtherewereonlinepaymentande-paymentmethodsinChinasince2000,mostpeoplestillliketopaywithcashthattime.
Thewillingofusingbankcard(debitcadorcreditcard)isnotstrong,becausethecustomersworriedaboutthattheinformationoftheircardexposedontheInternet[7].
Moreover,wheneverthecustomerusingbankcard,thewebcompaniesalsoweredependentonbankstodealwithcustomer'saccountandsettlement,fortheregularpaymentwayusingbankcardisthroughthegatewayofbanks.
Theadditionalmajorproblemisthatmostpotentialcustomerswhoaremiddleschoolstudentsandhavenotbankcardsforthemselves[8].
Ingeneral,themainproblemsfortheonlinepaymentinChinaareasfollows:Theperiodofpaymentandsettlementistoolongforcustomerstopaytheironlineservices.
Thefeechargedtocustomerortowebcompaniesishigh.
Soitisnotsuitabletomicro-payment.
Thepaymentmethodisnotdesignedforonlinepayment,andtherearemanytradearguments.
Lackofstandardofchargefee,lackofunifiedonlinepaymentandsettlementstandard,andlackofonlinepaymentorganizerandarbitrator.
Asknowntoall,peoplecannotseeeachotheronInternet,theydon'twantgotobankforjustamicro-paymentaswell,sothepaperbillsorcheckswhichweretreatedonthebank'scounterisnolongerineffectyet,evencash.
Thefundtransferwhichisdependonbank'saccountisalsounavailablebecauseofexpensivefeecomparedthepriceofvirtualgoodandservice,forexamplethefundtransferfeeisatleastmorethan1yuanRMBforeachdeal.
Evenusingcardalsobringsexpendituresuchascommunicationfee,handlingfeeandcommissioncharge.
GenerallytheefficiencyandcostofpaymentstructurenowinChinaisnotsuitableforonlinepayment,especiallyforonlinevirtuallygoods.
Sothewebcompanieshavetoexplorecreativewaysforonlinepayment.
Toovercomethesepaymentproblems,Internetcompaniestookaseriesalternativewayintheearlystage,suchas:Freepolicy,toallurecustomer,waitingpropertimetocharge.
Chargebyyearormonth,orchargeformembership.
ThroughtelecommunicationCompaniessuchasChinaMobiletochargecustomers,thenwebcompanysettlementswithTelecommunicationCompanyatscheduletime.
throughthethirdpartyinstitutesuchaspaymentwebsitelikealipay.
comor110InternetVirtualMoneyUnderChinesepaymentEnvironmentandIt'sefficiencyanalysisnetworkbanks.
ThemainpaymentinstrumentisbankcardsinChina.
Thefirstmethodadoptedisnotthemarketsolution,afterallnocompanycandevelopwellwithouthavingsteadyandcontinuousprofitorrevenue.
Themarketpracticealsoprovedthisisnotalongtermsolution.
Ifpeopleareusedtohavetheseservicesforfree,itisverydifficultytochargethemlater.
Thechangeofconsumehabitcannotbeineffectinshorttimeandmaymakecompanyintrouble.
Thesecondwayisineffectforthecustomerswhofavorthecompanyverymuchandfaithftiltoit.
However,thewayislackofflexibility,andisnotgoodformarketing.
Itcannotsubtractthevastpotentialcustomersandlosethematlast.
Furthermore,themostofthepotentialcustomersofthevirtualgoodprovideronlinearestudentsandyoungpeoplewhoseincomeislowerthan$200,sothesecondwayisnotgoodforenlargethemarketshare.
Thethirdandforthwaymentionaboveincreasethebusinessprocedures,theTelecommunicationCompanywillgettheirownprofitfromthesumofmoneywhichpaidbycustomer,evenmajorityoftheamount(i.
e.
60%).
Therefore,thecostofthelasttwowaysissohighthatlimitthefastpacegrownofwebcompany.
4Webcoinandit'scharacteristicsTheWebcoinemergedin2002fromTencentCompanyinChinacanovercomeandreducethesepaymentbarriers.
Itisaprepaidpaymentmechanism.
Itpresentstheamountofmoneythatcustomerhavepaidtowebcompaniesforfuturepurchases.
TheWebcoinisnotarealcoinormoneyoftherealworld,itisjustanumberintheInternetcompany'saccountandrepresentsthecustomer'srighttopurchasecommodityorserviceonline.
Infact,itissimilartothetelephonecard.
PeoplecangettheWebcointhroughseveralchannelsonlineorofflinesuchasbookstoreorInternetbarbycash,ornetworkbankbybankcard.
WhilepeoplebuytheWebcoin,themoneyistransferfromcustomertowebcompany,thenthecustomergetstherighttoconsumetheproductsthatthecompanyprovide,andthecompanyguaranteesthecustomer'srightandtheirmoneysecurity.
Ifcustomerbuyssomethingontheweb,thenumberinthevirtualaccountisdeducted.
Whenthenumberiszeroorlowerthantheproduct'sprice,customerisnoticedtobuyWebcoinstorefilltheaccount.
DifferentcompanieshavetheirownWebcoinandgivethemdifferentnames,inthispaperwecallallofthemWebcoin.
TheadvantageofusingWebcoininvirtualcommodityandserviceonlineismakeuseofthefinancialfacilitiessuchasbankcard,bankaccount,telephonebank,networkbank,aswellpapercurrency.
Itcanbesoldbystore,booth,gasstationorInternetwebsite.
ItnotonlyfitsintotheenvironmentofpaymentinChina,butalsotheconsumerhabitsinChina.
Itseemssimpleandeasy,butitavoidsthekindoflimitstohighpaymentcostandotherproblemsmentionabove.
ItisasuitablepaymentmodeinthepaymentenvironmentinChina.
Besides,asfortheWebcoinisstoredincomputer,itiseasytoputintouseformanypurposessuchasmarketingstatisticsandproductpricemarks[10].
Duetotheroleofpaymentinstrumentinthevirtualworldandthefunctionofpricemarkofintangiblegoods,i.
e.
aTshirtinthe"QQshow"ofQQ.
comwebsiteismarked1.
5"Qcoin",itispaidbyWebcoinalso,someexpertsinChinathinkthatHaishanTian,KuanhaiZhang111theWebcoinwillactasthecurrencyinthevirtualworld.
Furthermore,consideringthepotentialhugemarketoftheintangiblemarket,theseexpertsalsothinktheWebcoinwillbringanimpactonfiatpapercurrencyandleadtoinflationintherealworld.
[ll]Throughtheanalysisabove,wethinktheWebcoinisawarranteejustlikeareceiptorvoucheraftercustomerhadboughtsomething,it'snottherealmoney,itcannotbuyanythingexceptthevirtualgoodsprovidedbythiswebcompanywhohasissuedtheWebcoininitsownwebsite.
Intheotherhand,theWebcoincannotbeexchangedbacktopapercurrency.
So,wedonotthinkthattheWebcoinisfiatmoney,itcannotinfluenttheissuingamountofrealworldcurrency,itcannotleadtoinflationaswell.
TheWebcoinpaymentmodepromotesthewebcompanyfastgrown.
Forexample,theregisteruserofQQ.
comwhichisthefirstwebcompanytouseWebcoinisover570millionbytheendof3"^^quarterof2006[2].
TherevenuefromtheInternetservice-add-inpaidbyWebcoinisreach0.
49bYuanRMBinthe3rdquarterof2006,increaseby139%comparingwithlastyear.
TherestwebcompaniesincludeBaidu.
com,163.
com,Shenda.
com,Sina.
com.
cn,Sohu.
com,Wangfangdata.
com,Ssreader.
com,andsoon,alladoptorplantoadopttheWebcoinpaymentmode.
ThetablebelowfiguresoutthepartofwebcompanieswhichhadtheirownWebcoinsolutions.
Table1.
Partofwebcompany'sWebcoinsolutionswebsiteQQ.
comSdo.
comBaidu.
comSohu.
comSina.
com.
cn163.
comKingsoft.
comSsreader.
comWebcoinnameQcoinSandapointticketBaiducoinHucoinUcoinPOPOcoinKcoinStarcoinPrice(RMB)IQcoin/1yuan0.
5-2point/lyuan1Baiducoin/1yuan1Hucoin/Iyuan1Ucoin/Iyuan,bybankcard3Ucoin/6yuan,byphone10POPOcoin/Iyuan100Kcoin/Iyuan1Starcoin/1yuan5Webcoin'sefficiencyanalysisWebcoinraisedthepaymentefficiencyandreducedthepaymentcostremarkably.
Supposetherearethreeparticipantsinthewebmarket,thecustomer,thewebcompany,andtheagencywhichprovidepaymentservice.
Firstofall,wedefinethepaymentfrictioncoefficientsimplylikethis:Paymentfrictioncoefficient=costofpayment/totalrevenue*100%Obviously,Paymentfrictioncoefficientpresentstheinfluentofpaymentenvironmentonwebtrade.
Ifthecoefficientisbig,theefficiencyislow,viceversa.
112InternetVirtualMoneyUnderChinesepaymentEnvironmentandIt'sefficiencyanalysisThepaymentmodeonthewebinChinaintheearlystageisshowninFig.
l.
TheagencyforpaymentistelecommunicationcompaniessuchasChinaMobile.
Theprocedureisasbelow:custome1.
telephonenumber^web2.
service3.
money4.
revenueagencyFigure.
l.
paymentmodeearlystageinChinaTheprocedureislikethis:customersgivetheirmobilephonenumberstoawebservicecompanywhichthentransferuser'sinformationtoaagencycompany(suchasatelecommunicationcompany),thelatterchecksthisnumberandverifieswhetherthecustomercanpaytheservicefromtheusersaccountthroughtheagency,ifthecheckisthrough,theamountofmoneywillbedeductedtbytheagencyfromtheuser'saccount.
Finally,theagencysettlementwithwebcompanyinagency.
Inthiscircle,theagencywillkeep40%to60%fromthetotalamountreceivedfromcustomers.
Thepaymentfrictioncoefficientisabout50%.
Hence,theefficiencyofpaymentatearlystageislow.
Forexample,ifCustomerbuys3"UCoin"throughtelephone,hepays6yuanRMB.
Theagentcompanygivesthewebcompany3yuanRMBalso,(Fig.
l).
IfthewebcompanyadoptWebcoinmode,supposethereisanagencycompanytodealwiththeWebcoincardsales,theprocedurecirclewillbechangedlikeFig.
2.
ThedifferencewiththeFig.
1isthatagencysaleWebcoincardtocustomer,andthencustomeropensorrefuelsanaccountwhichiskeptinthewebcompany.
NowcustomercanconsumebytheirWebcoin.
BecauseoftheWebcoincardisissuedbythewebcompany,sothediscountisrangeof10%to15%.
Therefore,thepaymentfrictionislessthan15%,itmeansthatpaymentmodeinFig.
2ismoreefficientthanthatinFig.
l.
TheTencentCompany'sQQcardcarriesoutlikethewayoffig.
2.
custome1.
webcoin^web2.
service3.
buyWebcoin4.
settlementagencyFigure.
2.
WebcoinpaymentmodelwithagencyHaishanTian,KuanhaiZhang113Moreover,ifthewebcompanysalesWebcoinbyoneself,thepaymentfrictioncoefficientcanbereducedtoaverylowlevel.
TheTencentCompany'sEsaleisthewaylikethis.
TheprocedurecirclecanbeshowninFig.
3asbelow:custome1.
webcoin^web2.
serviceFigure.
3.
WebcoinpaymentmodelwithoutagencyFromtheanalysisabove,wecanfindtheWebcoinmechanismcanreducethepaymentfrictioncoefficient,andraisethepaymentefficiencyremarkably.
6ConclusionsPaymentmodelshouldbematchedthepaymentenvironmentandthedemandofthemarket,ortherewillbepaymentfrictionbetweenthem.
ThemainfunctionoftheWebcoinwhichisamicro-paymentmechanism,aprepaidpaymentmode,acustomer'srighttogetcorrespondamountofvirtualcommodityorservice,isintroduceintoreducethefrictionbetweentheInternetserviceprovidersandtheparticularpaymentenvironmentinChina,wherethepaymentsituationnowdoesexistmuchfriction.
Webcoinisalsocanbethoughttobeanumberinthevirtualaccount,itiseasytoputintouseformanypurposessuchasmarketingstatisticsandproductpricemarks.
Butit'snotrealmoneyandnoanyimpactonrealworldmonetarysofar.
Consideringthepotentialhugemarketoftheonlinevirtualcommodityandservice,itisveryimportanttoresearchandfindbetterwaystopay.
ThepracticeoftheWebcoininChinaisprovedthattheWebcoinissuitabletoChina'spaymentenvironment,whichpromotesthewebcompaniesfastgrown.
Therefore,itisveryimportanttoresearchandmakeusebetterofthispaymentmodeinChina.
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