Challenges in Entering the Chinese Market

With growing competition and stricter regulation across the European Union, Forex brokerages have started to turn to China for expansion. The reality is that if you have no plans to enter Asia in the near future, you are missing out on a new frontier with exponential growth opportunities.
China is a huge innovator in the FinTech industry and there is significant excess wealth amongst the Chinese population, which make this, an outstanding
market to expand into.

The challenge however, is that China is so different from Western markets in terms of culture, language, technology, way of doing business, and many other factors, that if you are not localized, you will fail in your attempts to enter this profitable market.

  1. Acquisition efforts in Western markets are spread across a vast range of channels, with affiliates bringing in over 70% of leads. In China, it is IBs who rule the acquisition game. Most IBs in China act as money managers for a small group of traders who have trusted him with their wealth. Brokerages deal with IBs, not directly with traders for the most part. Making IBs happy, making them look good with their traders and incorporating IB management systems into your technology is a key factor in succeeding in China.
  2. Trying to process payments in China in the same way you are used to processing payments in Europe or the rest of the world is a sure recipe for problems. Local PSPs, such as UnionPay, who has 100% brand recognition in China, know and understand the various regulations of the country and will ensure that you are able to receive and send money without a glitch.
  3. For a trading company, ping times are critical and the mere fact that China is geographically far from Europe, where most data centers are, means longer ping times. Add to this the high latency and inconsistent connection quality that exists due to the “Great Firewall of China”, and you can end up with connections roughly 100 times slower than in Western markets. Make sure you partner up with a company that has experience providing service in China. Tech provider Leverate for example, has a combination of local data servers and accelerated dedicated lines that results in ping times equivalent to those from Europe.
  4. Mobile technology and usage is incredibly strong in China, which means developing awesome apps is almost a requirement. Two big challenges faced by mobile developers are distribution and notifications. Because the Chinese firewall blocks Google and anything Google related, distribution of Android apps cannot be done through Google Play and notifications cannot be sent through GCM. Alternative ways of distribution are through Baidu and other local stores as well as placing the .apk file on the broker’s website. For notifications, hiring local ISPs and intermediary messengers is the solution.
  5. Trust (or lack thereof) is a big player in the way in which Chinese conduct business. In China, you first build a relationship and only then you do business. As a broker, it is important you get to know your IBs, show off your knowledge and expertise and prove you are dependable by providing excellent customer service, consistent execution and standing behind your promises.


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