Trunkbow and CUP partner to offer online to offline (OTO) payment services, but is it value add?

Written by Ken Ding || 13 Apr 2012

On March 28, 2012, Trunkbow, a provider of Mobile Payment services in China, announced that it has teamed up with CUP (China Union Pay, the only bankcard switch in China) for the development and deployment of a mobile online-to-offline payment system which will be launch in Q2 2012.

A new POS payment method, but only in a pilot area

Like other mobile payment services in China, this OTO (online-to-offline) payment service will initially only be available in Shandong Province as a pilot as it is one of the most popular tourist destinations in China. It will be deployed with the Shandong Tourist Administration to enable the purchase of tickets of sightseeing spots throughout the province.

Under the terms of the partnership, Trunkbow and China UnionPay will enable users to purchase attraction tickets via a smart phone browser or dedicated smart phone application. The purchase is verified and completed when the user input or scans the received code on a CUP’s POS terminal at the sightseeing location. Payment is processed through the China UnionPay clearing system at the time of redemption. Trunkbow is set to receive sales commission, transaction fees, as well as advertising revenue from this system and related apps.

A little bit creative but not competitive

Though OTO services are still new in China and Trunkbow calls this new POS payment service “an innovation”, but similar, although not widely commercialized, services are already available in China. For example, Alipay, China’s biggest online payment provider, wanted to extend its business from online to offline by launching its barcode services in 2011, which enables users to purchase online through Mobile Internet and pay offline by scanning barcode on a barcode scanner at the merchant location. Alipay’s innovative payment service has not been widely used so far: first, became of technologic limitation, sometimes a scanner cannot precisely identify each barcode from different screens of mobile phones; second, this payment service is not much more convenient than traditional payment means, such as bankcards and even cash, as no additional value-add services are provided by barcode payment.

In this Trunkbow case, though the new POS payment method is creative, it will not be competitive, as local travel agencies have already been offering a very convenient online payment service which enables customers to pay for attraction tickets through Internet and just show the received confirmation on mobile phones before entering into sightseeing spots.

Therefore, even though CUP has almost 150,000 POS terminals shared with Trunkbow in Shandong province, Trunkbow should really think about how to retain users through value-added services and how to expand its OTO payment service from tourist payment to other segments of the market. Perhaps looking at location based services or couponing.

For more information on China's Mobile Payment's market, please take a look at Kapronasia's 2012 China Mobile Payments report.

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