Online stores like AliExpress and DHGate do not have Paypal.
AliExpress even holds the money till you – as a customer – are satisfied with the purchase. Why is this and is it safe?
Why do so many stores offer bank transfers with Western Union, when you (we at StartBuyingInChina) say not to use it?
These are just a few questions about payment systems I got through my survey. And it is time to answer them!
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4 Different payment systems
In general you can find 3 different ways for your payments in China:
- By credit or debit card (MasterCard, Visa etc)
- Through an third party company (PayPal, Stripe, AliPay)
- By bank transfer (Western Union, iDeal, online banking methods)
- Money transfer (Western Union, MoneyGram)
And there are third party companies that handle the security for the payment systems. These can be integrated in the shopping cart. These services make a secured connection between the online store and your bank and handle the safety of the payment.
Let’s dig in!!
Credit and debit cards are provided by your bank. And in many countries you need to have some kind of income flowing to this bank account. Credit cards are the oldest payment system used on the Internet.
I think I made my first purchases in 1995, sending all my card details to some store in the US for some CD’s. Anyone who has your credit card number, expiration date and name could use your card online. So this method was very easy to hack. And yes my card info has been stolen and misused several times.
Fortunately there are new safety checks for credit cards online like the CVV code, which cannot be copied from the front site. And the 3-D SecureCode (MasterCard) or Verified by Visa methods.
Make sure your credit card payment is handles in a secured interface (Check for the HTTPS in the URL) and you’re pretty safe. But the store or their payment service – you might never heard of – still gets your card details.
Third party payments.
Third party services handle the actual payment for you. These are PayPal, Stripe, AliPay. You get a virtual bank account with these services. (But since most of our money is virtual, this is just like your normal bank). The benefit is that the store or their payment service do not get any card details. So there are less companies on the Internet that have your card details, and this is always safer.
You have a contract with PayPal or Stripe. You will grant these companies access to your bank account or your credit card. With your PayPal account, you can make purchases in many online shops without giving your financial details to these shops.
Online banking or making bank transfers is booming. In my country it almost took over the old way of banking. Today I have an app on my iPhone and iPad and in just a few seconds I can pay to any bank account in the world. The money is transferred immediately and if you use the same bank as I do, you receive the money immediately too.
The benefit and also danger of paying with bank transfers is the speed. It’s great this process is that fast, but if you send it to the wrong person (made typo in the number) and the receiver immediately withdraws the money, it’s very hard to get it back. That’s why I do not prefer this method with Chinese stores.
So why do so many stores offer Western Union?
Well, if it is a real and legit store, they have multiple payment methods and Western Union is really safe. Because you can trust the store! Your alarm bells must ring when a store ONLY offers Western Union.
Here is where all the trouble starts. Money transfers are very common for sending money to your relatives when you work in another country and you or the receiver does not have a bank account.
But for online business? It can be poison! You pay your money at an office in your country and when the receiver withdraws it, it is gone. If you have a fraudulent store owner, your money is gone at the moment you have sent it. There is no way of getting it back. That’s why money transfers (and bank transfers through Western Union or MoneyGram) are the only payment options fraudulent sites offer.
I wrote a blog before only on this. Please read: 10 reasons not to use Western Union.
Why do AliExpress and DHgate offer no PayPal if it is the safest method?
If the payment service isn’t secured enough, your payment details can be stolen. And although the payment method itself can be safe (like Western Union), if the receiver is a thief, you will still loose your money.
Back to AliExpress. This is a real and legit market place. If you buy on AliExpress, they handle your money with AliPay and escrow.
AliPay is the Chinese online banking system and is also part of the AliBaba Group, just like AliExpress. So AliExpress installed their own sister-company system and is not willing to use the competitor PayPal. AliPay handles about 50% of the online payments in China. Just imagine how many payments this must be! This company is huge! And must be very safe to use!
And then AliExpress uses the ‘escrow’ method. Escrow stands for a system that temporarily stalls your money until the transaction is finished. You actually pay when you make your purchases. The money is out of your pocket. And the shop owner receives the money when you say the transaction is finished. With escrow AliExpress can offer you a 100% satisfaction. Only when you received the goods and when you are satisfied, the store owner gets your money. So the store owner will do anything to have you satisfied! For you, this is great ;-).
Your money is stalled during +- 30 days at AliPay before the store owners receives it. Imagine how much money is currently stalled at AliPay. This must be billions, and AliPay gets the interest… There is no way that Alibaba / AliExpress / AliPay will ever allow PayPal integrate in their systems and have the profits flown to a competitor…
I hope this will help you to understand the different payment methods a bit more. Only paying is hot and many new companies try to get some percentages too.
Stay focused and use your common sense. When an online store suggest it has many payment systems like credit card, Paypal and Western Union. And when you make your inquiry, they mail you that they currently can only accept Western Union because of XYZ…………. You know better now!
If you have any questions or have any experience with fraudulent payments, please write a comment. I love to hear your thoughts!
Wishing you a wonderful week!
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