Communications & Networks

China began exploration of its fixed-line telephone point-of-sale (POS) business in 2003. By attaching a POS device (terminal) to a fixed-line telephone, the Chinese user can execute bank card payments, conduct banking transactions, pay bills, make reservations and perform other functions from the home. Security is also better addressed, as a fixed-line must be registered under a specific name.

Equally important, other than hardware, are the players along the value chain. In April 2006, China UnionPay, a Chinese bank card network operator, and China Telecom strategically partnered to provide such services.

Sine then, China’s fixed-line POS business has expanded substantially, and has entered into a cultivation period. In 2007 there were 1.1 million fixed-line POS users, a jump from 102,500 in 2006. Profitability appears on the horizon for services providers.

CCID Consulting forecasts China’s China’s fixed-line POS business will enter rapid development in the next three years. By the end of 2008, fixed-line POS users will exceed 10 million, and by the end of 2010, users will exceed 120 million with 8.5 million fixed-line POS terminals. By then, telecom operators will be able to realize an additional 120 million Yuan of associated value-added services.

Service providers are the key drivers.

Telecom operators, banks, and third-party independent operators are the major drivers for China’s fixed-line POS business, as they hope to increase their revenue base by providing such value-added services:

• Telecom operators hope to increase customer retention and revenue per customer. China’s telecom operators also hope to evolve towards more comprehensive service and content providers.
• Banks hope to increase activation of idle bank cards, increase utilization of existing bank cards, and in general, increase transaction volume and deposits.
• Third-party independent operators, such as UnionPay, see vast opportunities in various points along the value chain of existing telecom operators, banks, and other service providers.

The value chain shows promise.

Coordination of the various players along the value chain is critical. Players include terminal device vendors, solutions integrators, telecom operators, banks, independent third-party providers, and of course, users.

For example, China Telecom conducted promising pilot projects in in Shanghai, Jiangsu, Hubei and Hunan in 2007, and plans to expand to an additional 21 southern cities in 2008. Commercial viability appears promising as well.

Lack of standards is an inhibitor.

China Telecom and China Netcom have conducted different pilots that involve different technical and implementation standards. Terminal device vendors have to develop to different standards, thereby increasing costs. Currently in China, fixed-line POS terminals cost up to twice that of the common telephone, which can be an inhibitor. Equally important, lack of standards also means lack of testing standards and practices, which increases users’ concern about security.

Therefore, CCID Consulting believes that have uniform standards is another critical component of China’s fixed-line telephone point of sale (POS) business.

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Unless otherwise specified, all information provided is sourced from CCID Consulting.

Ó 2008 CCID Consulting Co., Ltd.