Chinese mobile payment

Podcast transcript #25: How to leverage Chinese mobile payment overseas

Find here the China paradigm episode 25. Learn more about Annie Guo’s story in China and find all the details and additional links below.

Full transcript below:

Matthieu: Hello, everyone. I am Matthieu David, the founder of Daxue Consulting, and this China marketing podcast, China Paradigm. Today, I am with Annie Guo. So, we found out about your business online through LinkedIn. I think someone shared about what you were doing in Paris—I guess in Europe now, because you have an office in Barcelona if I am guessing correctly. So, we looked into your business about Chinese mobile payment. So, there’s a company called Silkpay, and you are the founder or co-founder. You may tell us more about it later on. And this business is helping companies to monetize with the Chinese tourists in Europe.

So, when Chinese are traveling overseas, most businesses have difficulties actually to make them pay. And actually, because China uses QR Code. And that’s what you are doing. You’re helping foreign businesses from Europe and from, maybe, US—you will tell us more about that—to be able to sell to Chinese when they’re traveling overseas. So, you founded the company in January 2016. The third anniversary was like three months ago. You have also developed services to support the marketing of this company. That’s something we may talk a bit slightly about later on. But first of all, thank you very much for being with us on a Saturday morning. So, it’s 8 am French time and 2 pm China time. And so, what about the introduction? Was it correct?

Annie Guo: Yes, I’m so surprised about how much information you can get out from Internet searching. And yes, it’s exactly correct about our company. So, I want to start by introducing myself and how I came up with the idea of SilkPay. My name is Annie Guo. I originally came from China. I did my study in Paris in 2001 in a business school called HEC. And then afterward, I moved to London to work in the banking industry. During a personal trip in 2015 to Beijing, I found out that, I became a stranger to my own country in the sense that everywhere, people were paying with their mobile phone, without a wallet, a real wallet. But for example, when I took a taxi in Beijing, the taxi driver refused me paying him in cash in RMB. I was so surprised. He insisted that I used my e-wallet on my phone to pay him by Alipay or WeChat Pay like everyone else in China. 

So suddenly, I realized I had become a stranger in China, in my own country. And I can feel the pain that the Chinese tourists in Europe can feel, not just because of the language barrier, but also, they can no longer use their favorite way of paying in Paris or anywhere else in Europe. So that’s is why I came up with the idea of creating SilkPay and to be a partner of AliPay and WeChat Pay to educate the European merchants about this new way of paying, a new way of life actually. 

Matthieu: For the audience to be able to spell it, silk is spelled S I L K and pay afterward. So, you are helping those Chinese tourists in Europe to be able to continue to use the same system which is exclusively AliPay and WePay in Europe mainly. But first of all, could you tell us now what is the size of your business? If you could share some numbers about the revenues, about the number of payments which went through your system, the number of people in your company, and the number of clients for the people who are listening to us to know where you are in development? 

Annie GuoOkay. Sure. So, as you said, the name is SilkPay. The silk comes from The Silk road. That’s the ancient road that links China to the rest of the world to enable the trade between China and Europe and the rest of the world. That is also SilkPay’s, our company, mission. It’s to enable and facilitate the payment and the trade between China and Europe. The project took off in 2016, and the company was really created in July 2017. So, it has been a little bit over two years. And now, our headquarters is based in Central Paris. 

We have a team of 15 people based in Paris. We are now present in 11 countries across Europe. In terms of our clients’ presence, we have roughly 500 merchants in France.

Matthieu: I see.

Annie Guo: Yeah. We have roughly 500 merchants in France. We have served 250,000 Chinese tourists in Europe. For example, a number that we can say is the monthly volume of payment that we process is above €5M in value. So, we are quite happy about the speed of how things are developing. We have been increasing our customer base by 15% monthly since our creation. And also, we have been able to find investors to fund the development of our company. We did a round of fundraising in January 2018 with some local business angels, French business angels. And we raised about a €565,000 with those angels.

Matthieu: I see. Thank you very much for all the numbers. I think that the question that people are going to ask themselves when they listen to the volume you are managing—like €5M monthly of the transaction is what’s your business model? How do you charge your clients? 

Annie Guo: Our business model is quite simple for the merchants. Basically, we only charge the commission fees. We don’t have any installation or maintenance fee. Everything is free. They can choose one solution to another. There are no incremental charges. We only charge a percentage based on the transaction volume that we process for the merchants. So, it’s quite easy for the merchant to adopt our solution because if they don’t use it, if they don’t have any Chinese tourists in Europe come to pay, then it is free for them. Completely free. 

Matthieu: Could you share with us the numbers in terms of percentage? For instance, we know Amazon is taking 15% as the marketplace. For instance, we know T-Mall is taking 6-10% as the marketplace. What are the numbers for WeChat Pay, Alipay, and your service? I think that people need to know that we are not talking about payment within China. So, we are talking about the cross-border payment, which is more sophisticated. And as far as I understand, there are some third-party players even in China which are helping businesses to be able to invoice and to make Chinese clients pay. We know other players. Could you share the cost of going through your platform? 

Annie Guo: Yes. We have a single flat fee, which is 1.6%. That is a number that we’re going to deduct from the final amount that we are going to transfer to our merchants’ account. 

Matthieu: It’s very low. 

Annie Guo: Yes.

Matthieu: It’s very low. It’s very low. You need a lot of volumes to make a sizable amount of money, right? 

Annie Guo: Yes. That’s why we also provide digital marketing services to our merchants. And we believe that that is the added value to our merchants. So, we not only process the payment, but we also have this digital marketing service to help the merchants to increase their visibility in front of the Chinese tourists in Europe and help them to make the Chinese tourists loyal to their shops. 

Matthieu: Yeah, retention is a big topic. We may come back to that later on.  They can still buy the product from the shop back to China. I think that’s a very, very big topic. Going back to your model you said you’re offering, why is it so complicated for shops to do that by themselves? It’s a payment system that even the coffee shop can do it in China. Even the beggars can do it. Even the street artists use the QR Code technology in China to get paid. Why it so complicated for foreign businesses to do it?

Annie Guo:  The reason is that they can’t do it directly because there are two systems. There are two ways of working in China and the rest of the world. That is how the system of AliPay and WeChat Pay works because there is one which talks about Chinese mobile payments in Europe or the US or anywhere else in the world. It’s a different system. It’s a cross-border payment. It involves a change in RMB, which is the local Chinese currency to the local currency of the merchants. And if we talk about Europe, that will be Europe. So, there is a foreign exchange involved. That makes the matter a little bit more complicated, the trade between China and Europe complicated, considering the Chinese government has a very tight control in terms of how the money flows in and out of China. 

Matthieu: Great.

Annie Guo: So, it’s a different scenario. And that adds a little bit more layer of complexity to the payment solutions in China. So, in essence, the merchants in Europe cannot just talk directly to Alipay or WeChat Pay and say, “I want to install those payment solutions at my shops.” They have to go through a third-party partner of Alipay and WeChat Pay such as SilkPay. For example, if you think about Visa and MasterCard, they are actually large groups, and a coffee shop just can’t go directly to Visa or MasterCard and say that “I want to accept your payment means in my shop.” That is not possible. They have to go to a local bank or a local payment company and ask them to install Visa or MasterCard acceptance in their shops. It’s exactly the same way for Alipay and WeChat pay. You need to go to your local bank or to a third party like myself to accept those payment means.

Matthieu: I see. I see. Visa and MasterCard have not penetrated the very low little payment. Like if you go to a coffee shop in France and you spend less than a €10, they will ask you to pay in cash. In some way, for Chinese tourists in Europe, it may be easier to pay for small transactions with your solution than for French people. That could be the same. You said 1.6%. I understand now more about the complexity of foreign businesses invoicing Chinese clients. Does 1.6% include condition rates? Does it include all the fees or there are other fees to consider? 

Annie Guo: As for the payment part, there are no fees to consider. Everything is in quotas actually. So, it’s an amount to the fees that the merchant might pay to Visa and Mastercard. We have to be positive as of payment means because otherwise, the merchant will just prefer to ask for the Chinese customer to pay in cash or pay in cards. 

Matthieu: Yeah. Yeah. So how does it work? The Chinese client needs to pay with WeChat or Alipay. The money is going to be taken out of the bank account in China in RMB. And it’s going to arrive in the bank account of the shop. Let’s take a small shop like a drugstore or a pharmacy in France. They are going to receive in Euros. Am I correct?

Annie Guo: Yes.

Matthieu: The shop is going to get the money in Euros and deducted by 1.6%. How much time does it take? 

Annie Guo: It depends. In some cases, it’s two days. Sometimes three days. Depends on if it falls on the weekend or a bank holiday or not. Yes. So, it’s two to three days. 

Matthieu: I see. I see. What technology have you developed in order to offer this service? Have you been able to develop a specific technology with the API WeChat or Alipay or you are leveraging existing technology and making it more known within the European market? I feel you are filling two gaps. You are filling a knowledge gap—those who don’t know that Chinese consumers are using WeChat and Alipay. That’s what you provide to those… it’s a knowledge gap. And you are also filling a technological gap. I fully understand the knowledge gap, and I think it’s been very easy to understand. But with the technological gap, what are you offering on top of the existing solutions in China. Have you had to develop something?

Annie Guo: We have to develop to adapt to the local market needs. We have to think about the French market, for example. 80% of transactions are paid by cards—bank cards. So, every shop is equipped with the facility to accept a payment made by card. But this is a completely different technology because the Chinese e-wallets such as Alipay and WeChat Pay are based on the QR Code technology in China which nobody actually uses in Europe because they prefer the other way which is a non-touch technology. So basically, they just use the e-wallet or the card to touch the reader to make the payment. That’s the most popular technology in Europe then. So, we are introducing the solution adapted to the QR Code technology in China which is used by all the Chinese mobile payment companies.

Matthieu: So, what you are offering them is for free. So, I guess you are asking them for exclusivity to be the exclusive partner for Chinese buyers. And then you help them to connect with AliPay and WeChat Pay plus creating what you call a static QR code because QR codes can change all the time. They link to the same identity, but they can change all the time. So, you’re creating a static QR code which is not changing. That’s what you are offering to them; connecting to the platform plus helping them to use the QR code technology in China, but in Europe.  

Annie Guo: Yes. As a part of our service, we actually offer six different ways of accepting AliPay and WeChat Pay in their shop. It depends on the situation of the merchants. The static QR code is the most widely used one among our clients purely because of the simplicity of the same method. So once the client’s account is opened, we just need to email them the image of their QR code. They print it out on a color printer, and that’s it. They’re ready to go. But other solutions will involve… for example; we can give them a scanner machine which we have to train them about how to use this scanner machine. And with a scanner machine, they can generate…with the pass machine; you can generate an image of a dynamic QR code which can change transaction by transaction. And also, they can use a machine to scan the phones of Chinese users. So, the shops don’t really have this kind of machine. And we can equip them with the machine to enable them to accept Chinese mobile payments. 

And there are other solutions. For example, we can integrate our solutions into their cashier system. It is compulsory in France for the retailers to be equipped with a cashier system which will register all the transactions that pass through the shop for fiscal reasons. And also, we can integrate our solutions into this cashier machines, and the shop owner can simply use their scanner attached to their cashier machine to scan the telephones of Chinese tourists in Europe. They already have those systems or hardware in their shop. They can just use our software, our API, to enable those acceptance solutions.

Matthieu: Have you created your own API?

Annie Guo: Oh, yes. We do have our own API. Yes.

Matthieu: Okay. And this API is connecting them to Salesforce and other solutions which are prevalent in Europe, in France. 

Annie Guo: Well, the shops actually use different cashier systems. There are about a thousand of them in France. 

Matthieu: I see.

Annie Guo: Yes. So, there isn’t predominant used ones. No. So it is, uh, a meta, case by case. 10 shops can have 10 completely different systems. 

Matthieu: I understand. So, it’s even more than the payment system that you are connecting with the CRM. You also make it compliant and legal for them to use it because as you said, there is a legal challenge with the cashier to connect the taxes which is actually very established already in China with the payment system. I see. So, it’s much more than the payment system only. You mentioned that you are also on your website. Before we started, I mentioned to you that it’s on your website. It’s mentioned that you are also providing marketing services, managing Weibo, WeChat, and so on. I feel now that it was very natural for you to begin to push your clients to use those marketing tools. Maybe not doing that yourself, but at least to work with partners and all the people that you provide the system. Because first, when you receive the payment of someone, you can get the WeChat identity. So, you can push them to follow you.

Secondly, when someone is buying a product in Paris, you may want to continue to sell when they are back to China. Let’s talk about WeChat. WeChat is so involved in the daily life of everyone that it would actually be on a daily basis. So, I see the interest in offering marketing services. Can you tell us more about what you feel is necessary and the most attractive for those businesses in order to continue to sell to their clients in China? 

Annie Guo: Yes. I think what you said is very important because, from the European merchants’ perspective, they think the Chinese market is so far away. It’s so difficult to understand and to penetrate. But actually, there are some existing solutions which are very easy to use. They don’t cost a really huge budget. You just need to be smart about it and not be afraid of using them. And then you can convert all these Chinese visitors into repetitive visitors of your e-shop.

So, it is really a virtual cycle that, by adopting WeChat Pay in the shops, you can convert all the Chinese users into loyal customers of the e-shop of the same brand. So basically, we provide these marketing tools. For example, we can help the brand to create the e-shop based on WeChat and then the Chinese tourists in Europe who have paid with WeChat will become members of this e-shop. They will continue to follow the official WeChat account of the shop or the brand. And they can continue to buy, to make the purchase, through the WeChat e-shop that the brand will connect to their official WeChat official account. 

Matthieu: I thought that you could not open an official account if you didn’t have a Chinese company.

Annie Guo: It’s no longer the situation. 

Matthieu: Okay. Okay. So, any foreign business in China with a foreign license can open a WeChat page or official account. 

Annie Guo: Yes. Because WeChat actually is a constantly changing company, their way of doing business and functionalities they provide change on a month-on-month basis. So that is not possible until September last year. But since then, things have changed. Now they are adding more foreign countries where the foreign companies can directly own a Chinese official account. And that enables consumers based in China to buy directly from their e-shop. That is possible right now. So, we help our French merchants to open a WeChat official account, then attach an e-shop on that and then convert all the travelers into frequent buyers of these e-shops. 

Matthieu: I see. Could you tell us about, in this case, if the Chinese consumer or client is back to China and needs to get the product delivered because I guess it’s most of the time product and services, what are the taxes? What are the legal restrictions and taxes you have to apply? 

Annie Guo: Well, since January 2019, the Chinese government has issued a new law to regulate exactly the cross-border e-commerce activities and trade between China and Europe and the rest of the world. With this new law, it says that… there are a lot of details about the law, but essentially, the cross-border entities like the French shops can legally sell things cross-border to China and by paying the customs fees. And the customs fee is actually quite reasonable. For example, if we take a very popular French food, which is the red wine made in Bordeaux, the taxes applied to it for the cross-border trade is only 20%. 

Matthieu: Including VAT, right? No other tax? 

Annie Guo: Yeah, but actually, VAT is only applicable when it’s a sale in Europe in the same VAT zone. And if you sell it to China, I don’t think we need to apply for the VAT. That’s the idea of tax-free shopping because the Chinese consumers don’t have to pay the VAT applied to European consumers. So, if I take the example of a couple of bottles of Bordeaux wine directly delivered from a Bordeaux producer to the doorframe of the Chinese consumer, what basically the Chinese consumer will be charged is 20% of the customers’ taxes plus and the delivery fees. And the delivery fee is quite reasonable actually based on the volume and the weight of the goods. But in the case of a couple of bottles of wine, it is somewhere between €13-20 euro which makes the total bill to be something around €20-30 Europe. And if we compare the price that they purchase those bottles of wine directly from the producer, it is much lower than the price they can find for the equivalent products in China. And also, what is very important is that the authenticity of the product is nearly guaranteed because you buy directly from the producer. But we all know that in China, there is a huge problem with counterfeit goods. So, you’re never sure that what you buy is really what you want to buy. 

Matthieu: It’s very interesting. I think, actually, it’s raising a lot of other questions; the first question being that why is the Chinese government helping foreign businesses to actually be more competitive than local importers and local distributor who have to apply, I think, a total of 48% on a bottle of wine including VAT? So that’s a question I don’t have an understanding of how to explain why the Chinese government is…

Annie GuoI think I have a few ideas about why the Chinese government is helping foreign businesses to do business with China. One thing is that they can’t stop them. Whatever they do, foreign businesses will consider…. the Chinese consumer market is one of the most important ones in the world. And all foreign businesses will try to do business with Chinese consumers anyway. If they don’t have this transparent and quite favorite taxing system, then that will be Daigou. You know, the personal shoppers. If I want to explain the Daigou that actually are the Chinese who are actually not paying any taxes at all. So instead of encouraging the Daigou, the Chinese government just issued this new law which will encourage a business to do things in a very transparent and legal way. And to encourage that, the taxes applied to this new cross-border business is not very high. So, people will not really risk the sanctions to do the Diagou, which is an illegal business. 

Matthieu: Oh, I see. I see. It’s a bit pragmatic. The market forces are too strong. I see. You were talking about being able to continue to sell to a Chinese client when they are back to China. So, you pretty well explained the case of wine. Wine, I feel, doesn’t require too much regulation. You can send wine. You don’t have to do tests and so on. But that is a case of cosmetics. What about products which are a bit more touchy? I’m thinking about food. I am thinking about infant formula. I’m thinking about cosmetics in China. I am even thinking about drugs about medicine. Do you have restrictions? 

Annie Guo: And the second point is with logistics. When you send wine, you have to pretty careful on the temperature or the humidity level and so on. 

Matthieu David: Those two questions are both in terms of regulation and terms of conditions of logistics. How do you work on this?

Annie Guo: In terms of this new cross-border law, if you send small quantities across by post, actually, you don’t really have to be compliant to the Chinese food and safety regulations. You don’t really have to register with those Chinese ministries, which is very… I mean a lot of French cosmetic brands are relieved because it is really costly to pass those tests. For example, if you take a brand like Lanvin, they have thousands of SKU. So, each SKU has to be examined in a Chinese laboratory. And every time they change the formula or the ingredients of their cosmetic products, they have to re-pass those tests. It’s really costly and time-consuming. And the Chinese government will ban certain ingredients which are quite widely used in Europe. So, by using this new system, we can send things with parcels. The cosmetic brands will not really have to pass those laboratory tests and register with the Chinese ministries. 

Matthieu David: Yeah. Again, I think for European leaders, it sounds so surprising when you listen to the government saying Google has to pay taxes, pay taxes in France, and the Chinese government is saying, “Pay a lower tax. Sell from overseas. Don’t follow exactly the same rules because anyway, the market is working this way. So, we are going to take off the taxes we can get out of it”. I feel that that is the idea. And we are going to achieve it by different rules. But that sounds a little bit surprising, isn’t it? 

Annie Guo: Yes. But I think behind it, there are some political reasons as well. Like all these things will contribute to building Chinese power globally. Imagine that by encouraging foreign businesses to sell directly to China. That basically just closely link foreign businesses to the Chinese interest. And even the small producer of Bordeaux wine or a biscuit shop in Paris can feel the importance of China and the economic power behind it that they couldn’t feel before. Now they sense it, and if there are some problems between Europe and China, the businesses in Europe will feel so much pain. That is actually a political pressure on it. 

Matthieu DavidYeah, we saw that with actually the solar panel and the wine industry. Solar panels were banned from China to export to Europe, I think, a few years ago. And China reacted by putting a restriction on wine affecting many in France. So, I think it was a bit painful for wine producers. So yeah, that makes a lot of sense. 

I interviewed a couple of companies working, especially with influences, KOL (Key Opinion Leaders). It could be with live streaming. I interviewed Lauren Hallanan yesterday. But also with platforms within China like Xiaohongshu or with the platforms dedicated for finding KOL like ParkLu, do you think that the people who are buying in France from the shops could be converted once they are back to China as a KOL or influencer and being able actually to create evangelists of the brand or the product? 

Have you worked on the product, or have you pushed your clients to do that with their existing database? 

Annie Guo: Yes, it is a very controversial issue. I feel that we sense that more and more… the influencers on Xiaohongshu and those kinds of platforms dominate the voices, the images, and the messages that a brand can send to the Chinese consumers. Those are the most efficient ways for the brands to communicate with Chinese consumers, but every French business that I speak to find that the pricing charged by the Chinese influencers is so many times more than the equivalent that stars or influencers will charge in Europe. So, it is not really within everybody’s budget to communicate through the Chinese KOLs. And only the big businesses in Europe or the luxury industries with a high margin will be able to afford it. For a lot of our customers, just because their margin is so thin sin that they cannot possibly use these kinds of tools to communicate and to build their image with the Chinese consumers, which is a quite a shame. 

And I think that with technology developing, the knowledge gap between the Chinese consumers and the rest of the world is actually narrowing quite rapidly. And one day, we wouldn’t really need to depend on the influencers to be the advocate of the brands or products made in Europe. Just by virtue of these products, it will speak for themselves. And through different channels, the Chinese customers can acquire as much knowledge and information about these products as European consumers. But today, because of the language barrier, because of lack of active channels, the Chinese consumers cannot get the right and enough information about what the real products and services are in Europe. So that will play a very big role now for the moment. 

Matthieu DavidI see. Yeah. So, have you worked with companies or have you thought about developing a system so that your clients you have in France from the drugstore could actually resell or could advertise on the product they build like you invite your friends so you’ll get the discount from them. I feel that something you tell you has thought about in order to scale a bit more those companies in China without being present physically. Have you already worked on it? Have you thought about it? 

Annie Guo: Yeah, we need to understand that the gap between what the Chinese consumers want, their behavior, and what the European market, the merchants… the European merchants are more concentrated on their offering and their image and the positioning of their brand than doing discounts to increase the sales. What we can see in the Chinese market is that without the discount, without promotions, you can’t sell anything. When it’s a full price, nobody is going to buy it. Everybody will wait for the single day or another offering, and they always wait for the promotion campaigns to come. They know they will come in. But it’s not the case in Europe. There are so many brands. The luxury brands don’t sell on promotions. They never do promotions actually. And a lot of European businesses and brands think that way. They think a promotion is bad. It’s damaging their image. So, we still need to do the education. One or another, there is not a right answer, but we need to narrow the gap to make sure the two of them enmesh somehow.

Matthieu DavidGetting more bundles. Getting more clients and expanding the database of each client. And expanding the database of each client necessarily is a China topic. Within China, there are returning clients. There’s a client who could come from the returning clients and so on and getting more client for you. It’s a European business, but then to get returning consumers for Europe than, it’s going to be a big China business.

I was asking a question on how you can create a snowball creating more and more followers, more audience for all those businesses — one question about your location. You are in Paris. I understand you worked some time a long time with HSBC. That’s something I would like to go back to later on. And Barcelona. So, could you explain why these locations? 

Annie Guo: Actually, we have an office in Venice. The location is actually based on the frequency of Chinese tourists in Europe and the strategic importance of the market. Barcelona is one of the most visited cities in Europe. Lyon is the second largest city in France. And Venice is simply because it’s one of the favorite destinations of Chinese tourists in Europe. And our single number will increase. In terms of Chinese travelers, the most important country in Europe is France. 2.2 million Chinese travelers visited France last year. With the ‘gilets Jaunes’ or the social movement that disturbed the business in Paris every Saturday, the number of Chinese visitors has decreased because of the fear of safety, but we hope that they will resolve this kind of social issues and the Chinese travelers will still come back to Paris. 

Matthieu DavidFor those who are listening to us who don’t speak French, the ‘gilets Jaunes’ is a yellow jacket. It’s a movement of protests in France which is happening every Saturday, which is a bit surprising, but that’s the way it works. And they actually are on major news or stories. And there had been a lot of damages on some Saturdays. It has been on every TV in the world, so some Chinese, I guess, have been a bit scared and at least puzzled by what’s going on. 

So, you were saying that it has decreased a little bit, but still, I guess it’s a major force within the tourism industry and Chinese tourists in Europe. 

Annie Guo: Yes. 

Matthieu DavidYou talked about Lyon, but Nice seems to be one of the biggest…. if I had to say which city Chinese tourists in Europe like most, I wouldn’t have thought about Lyon, to be honest. 

Annie Guo: Yes, but Lyon actually is also because it is very close to Switzerland. It’s actually convenient to go to Switzerland. Our Lyon office also covers the Switzerland market. Switzerland is a very interesting market because there are 1 million Chinese visitors every year visiting Switzerland. That is a huge number. They are not just leisure travelers, but also business travelers. We can consider there are two Chinese ambassadors in Switzerland. I don’t know any other European countries that have full Chinese ambassadors. It’s because there is one ambassador to the country in Bern, which is the capital of Switzerland. And there are like three of them based in Geneva because Geneva is a diplomatic position. There is the UN etc. There are organizations and the Chinese send ambassadors to them. So, there are many business and political travelers to Switzerland, and they are very high spending consumers. The top products that Switzerland sells are watches. So, it is a very important market for people like us who facilitate cross-border transactions. So that’s why we are in Lyon. 

chinese mobile payment overseas

Matthieu DavidI see. Before we started, we talked about the need of getting a license in Europe? You talked to a journalist online. I mean, I saw the article when preparing the interview. You were thinking, or you were getting, or you just got… I don’t know… maybe, that’s some news about it… a license to be more independent. Can you tell us more about what license and why you need that? 

Annie Guo: Yeah. Payment businesses are regulated by the European Union. Every payment company has to have a payment license. Every country issues its own payment license. But if you get one in one country, you can passport it across 26 countries across Europe. So that is why we don’t have a payment license yet. We are in the process of getting one, and hopefully, we will get it by the end of this year. Now, how do we do our business? We are agents of the payment company with a European license which allows us to do business already without getting our license ourselves. 

Matthieu DavidWhat is the payment company? Could you give some names?

Annie Guo: Yes, there are so many of them, and we work with a number of them so that we can cover all the geographies. For example, we work with the Accor Hotel Group, and they had 4,000 hotels last year. Now they have more across the world. So, we work with different payment companies in the US, in Australia, in Asia, and in Europe, so that we can enable Accor Hotel Group to get AliPay and WeChat Pay in all the countries they cover. I don’t remember the number, but they cover like 60 or 80 countries across the world or some of the African countries never heard of. And then we need to cover Alipay and WeChat Pay in those hotels as well. That’s why we work with several payment companies across the world.

Matthieu David: With the payment company license, is it what Visa and MasterCard have? Is it what PayPal or Stripe has? I don’t really get why the license system would be helpful for you to use it. Is it going to lower your fees? Is it going to make it possible for you to…

Annie Guo: Yeah. It won’t lower my fees, but it will increase my margin. Because now we are agents of other payment companies, so we depend on their system, and we need to pay them for using their service. And once we become a payment company ourselves, we will save money on the payment we make to those payment services companies. So that will increase our margin. 

Matthieu DavidI think I am beginning to get it. So, does it mean that you would not have to go through a third party when transferring from a Chinese bank account to a French bank account? Does it mean that this transfer will be fully processed by you instead of going through those third parties like maybe every bank has one of them, and they charge you? You wouldn’t have to do that anymore. 

Annie Guo: Exactly. Yes, we will save money on the fees. Yeah. And the finance sector is very regulated. It is very tightly regulated in Europe. So that is why the payment service industry is regulated as well. And so, to do business independently, we need to have this payment license within the European Union. 

Matthieu DavidWhat it means is it’s difficult to get. What do you need to do? Do you need to pay? Do you need to show a lot of documents? Do you need to comply with a lot of other elements? 

Annie Guo: Yeah, the entry barrier is actually quite high. Otherwise, everybody will be able to become a payment company. The laws are very strict, and they will look at your company’s structure. They will look at how you do business and your procedure. You have to document every single thing you do throughout the day. You have to ask for a lot of documents from your customer. And that is what we call the KYC (Know Your Customer) which means that the merchants that we send with have to provide us with several documents to prove their business and to prove who is the real owner behind these businesses. And that actually caused a lot of questions and oppositions from the merchants because they don’t understand why they need to give me, for example, their passport and the proof of address of their owner. Sometimes, for the big companies, the owner doesn’t want us to know he’s the real owner behind the business. So, we are asked by the regulators to do that, and we have to do that. We understand why they want us to do it. But to enforce it is quite a difficult task. 

Matthieu DavidI see. Last question before we end. You had been Vice-President of HSBC for the M&A Department. How is it to transit from being in a very nice office, from a very big company, and having a lot of comforts to actually starting from zero? Could you share the motivation behind this with me? 

Annie Guo: I think that the investment banking industry is a very good experience and it’s very interesting. I have been working with very interesting people and had some deals that were in the newspapers, but I think that that working for other people is to realize how can others realize their own dreams. Actually, at a certain age, I wanted to start realizing my own dream. And I think I have something to say and some opinions to express. I can only do it by starting my own outlet, which is why I started to create my own business. Chinese mobile payments can have in the European market because now the market share of mobile payments is so small. And then, it can only increase in the future. 

Matthieu David: I talked with another entrepreneur in China who used to work in investment banking and dropped it because she wanted to start a business but also to be able to work more with China and her investment bank was not allowing her to work with China. And she was seeing not being able actually to leverage it. So, I feel there’s a lot of Chinese tourists in Europe and not exposed enough to China. So, they want to actually do the things themselves. What about the next step for you? You want the license to be more independent. What is the next development for SilkPay? 

Annie Guo: We are always in the process of acquiring more merchants, and we will cover more territories in Europe or outside of  Europe. We’re looking for partners to accelerate our development in different countries. And we are also in the process of doing another round of fundraising because this is like the gun powder that will enable us to accelerate our development. So, yeah, those are the main things we are doing; fundraising and going to different countries.

Matthieu DavidOkay. Congratulations for all you’ve done in such a short time. It’s not even three years since you officially started. So, congrats for everything you’ve done. And hopefully, you enjoyed participated in this episode of our China podcast, China Paradigm, and all the listeners enjoyed it. Thank you very much for your time. 

Annie Guo: Thank you, Matthieu. Thank you for having invited me to China Paradigm. Bye-bye. 

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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