Risk-Based Payment Models in Internet Healthcare: IPO Filing Highlights Secure and Efficient Digital Health Transactions

In recent years, the global mobile health industry chain has experienced explosive growth. A ripple effect of this trend is that mobile health has also driven significant development in e-commerce, with the scale of online payments increasing year by year. According to the "2015 China Electronic Payment Industry Research Report" released by iResearch, the transaction volume of personal online banking in China reached RMB 448.5 trillion in 2014, a year-on-year increase of 70.3%. Meanwhile, the transaction volume of corporate online banking stood at RMB 855.9 trillion, representing a year-on-year growth of 28.4%.

Although online payment is relatively convenient, it poses significant risks in terms of security and privacy protection, such as password leaks and privacy breaches. Therefore, a mature risk management model for payments is crucial to the healthy and stable development of the mobile healthcare industry.



What is a risk-based payment model?
Risk Payment ModelsRisk payment models refer to the various payment methods consumers use when conducting online transactions, such as payments related to mobile healthcare services. These payment methods inherently carry certain risks. The risks primarily manifest in two aspects: First, consumers cannot directly inspect the goods or services prior to purchase, posing risks in assessing product quality and service standards. Second, online payments require consumers to input sensitive personal information, including bank account numbers, passwords, names, and national ID numbers, which are susceptible to data breaches. As a crucial tool for e-commerce activities within the mobile healthcare industry, online payment encompasses diverse payment models, each with varying risk profiles. Collectively, these are termed "risk payment models."

Classification of Risk-Based Payment Models
According to international definitions of online payment, there are five basic types of risk payment models in mobile healthcare:
1. Electronic Check



E-checks refer to a payment transaction method conducted via the Internet, functioning identically to paper checks. Existing in electronic format, e-checks eliminate unnecessary steps associated with traditional check transactions while providing enhanced security. Security features of e-checks include authentication, public-key encryption, digital signatures, and secondary encryption. Typical international e-check systems include NetCheque, NetBill, and E-check; however, the development of e-checks in China has been relatively lagging. These characteristics make e-checks well-suited as an essential model for online transactions in modern mobile healthcare.
2. Electronic Cash



Electronic cash, as the name suggests, is a technology that simulates physical cash in electronic form. It is the debit card system of the German Banking Industry Committee, representing the highest financial interests in Germany. Typically, electronic cash is linked to a transaction account or a frequently used account, and bank cards bearing the electronic cash logo are issued exclusively by credit institutions. Electronic cash features high mobility and anonymity, advantages that provide a solid foundation for its application in modern mobile healthcare payments.
3. Online Banking Payment




This model refers to a virtual bank in which the bank provides financial services—such as account opening and closure, inquiries, reconciliation, fund transfers, credit facilities, online securities trading, investment and wealth management, and online payments—to customers through its own website and homepage. Customers complete online payments via this platform. Under this model, merchants are required to open settlement accounts with the bank, while customers must obtain payment cards from the bank and maintain a sufficient balance on these cards.
4. Third-Party Payment/P2P Payment Platform Model



P2P payment platforms, also known as “third-party intermediaries,” represent the fastest-growing payment model in China today. Payment platforms with escrow functionality, such as Alipay, are the most representative examples. This model requires both customers and merchants to first register accounts on the P2P payment platform. This dual-registration structure simplifies the payment process, as all processing is handled internally within the P2P platform, eliminating the need for external banking networks to participate in the transaction. Customers can fund their payment platform accounts by linking their bank accounts, sending postal money orders, or making offline top-ups. However, customers and merchants must hold accounts with the same service provider, and the payment gateway continues to serve as the link between the payment platform and the banks.
5. Mobile Payment



Mobile payment, also known as mobile pay, generally refers to payment services operated under the supervision of financial institutions, primarily conducted through mobile devices such as smartphones. As mobile phones increasingly replace cash and credit cards in payment processes at stores and retail kiosks, and with the widespread adoption of SMS-based billing for mobile content and applications, mobile payment has gained broad public acceptance. However, the deeper application of mobile payment in China remains in a market cultivation phase. There are four primary business models for mobile payment: mobile bill payment, mobile wallets, mobile banking, and mobile credit platforms. Mobile payment is characterized by its ubiquity and short transaction times.

Pros and Cons of Risk-Based Payment Models for the Development of Mobile Health
 Advantages:
Regardless of the risk-based payment model, the greatest advantage is convenience, enabling the rapid completion of mobile healthcare transactions.
 Drawbacks:
First, the issue that risk-based payment models cannot avoid is the security of online payments. For consumers, security is the primary factor in their decision to use online payment methods. Modern mobile healthcare terminals predominantly serve smartphone users, and infections from mobile viruses or Trojans can pose significant risks to consumer payment security. It is important to note that there is an inherent contradiction between the convenient user experience pursued by mobile payments and payment security. It is difficult for any risk-based payment model to achieve both convenience and security simultaneously. Therefore, enhancing the payment experience while ensuring consumer payment security is key to the development of the mobile healthcare industry.
Secondly, since various risk-based payment models involve the interests of multiple parties, including banks, merchants, and third-party platforms, a mature win-win model has yet to emerge. As a result, the development of risk-based payment models has been hindered, and business expansion has been significantly constrained. These shortcomings have also impeded the growth of the mobile healthcare industry.
Finally, the protection of consumers’ personal information also warrants attention. China’s mechanisms for safeguarding personal information and privacy are relatively inadequate, and numerous incidents of user data breaches have already occurred in internet-based payments. These negative precedents are bound to adversely affect the development of the mobile healthcare industry.

Current Status and Recommendations for Risk-Based Payment Models in China’s Mobile Health Sector
Nowadays, with strong support from national policies, China’s mobile healthcare industry has witnessed rapid development, leading to a growing demand for online risk payment solutions. How to ensure a sound payment model that supports the swift growth of mobile healthcare has become an urgent issue to address. In light of this, relevant improvement proposals warrant careful consideration:

1. In response to consumer concerns regarding risks associated with third-party payment credit, as well as losses stemming from improper custody of funds in third-party accounts, we recommend establishing a robust domestic credit evaluation system to safeguard the financial security of both transacting parties and ensure the sustainable operation of payment platforms. To this end, first, the credit guarantee function of third-party payment platforms should be enhanced, supervision over payment transactions between merchants and consumers strengthened, and credit risks associated with online payments reduced, thereby improving public satisfaction and confidence in online payments. Second, strict legal sanctions should be imposed on cybercrimes such as money laundering, credit card cash-out schemes, and fraud, so as to create a safe and stable environment for online consumption and digital payments.

2. In response to consumers’ concerns about privacy and financial risks arising from personal information theft and subsequent property losses, we recommend accelerating innovation in information security technologies to ensure that e-commerce transactions are conducted securely and efficiently. Meanwhile, supporting legal frameworks should be improved by enacting relevant laws to protect consumers’ interests and privacy rights, and by clarifying the interest relationships between users and online payment platforms.
3. To address consumer concerns regarding risks associated with merchants, regulatory oversight of the quality of goods sold and medical services provided by merchants should be strengthened. Merchants should prioritize product quality to establish a robust brand image among consumers, while also ensuring that after-sales service is not neglected.

4. Regulatory authorities should educate consumers to enhance their safety awareness. Criminal activities such as online fraud lead to violations of consumer privacy or financial losses; the emergence of these risks is associated with consumers’ weak risk awareness and lack of relevant knowledge. Therefore, relevant regulatory authorities should also conduct publicity and education campaigns on online consumption and digital payments for consumers, strengthening their cybersecurity awareness and awareness of rights protection, thereby avoiding unnecessary losses.

In summary, the aforementioned recommendations can provide essential references for innovating online risk-based payment models in today’s vast mobile health industry.