The mobile payment revolution in China; the present and future of Alipay
Its founder, Jack Ma, officially spun off Alipay from the parent group in 2011, a decision that drew criticism from major shareholders (such as Yahoo Inc), but which Ma justified as a necessary adaptation to legislative changes made by the Chinese government. In any case, the firm's corporate ties with Alibaba haven't changed much in practical terms: Lucy Peng, CEO of Ant Financial (the new owner of Alipay), is also a senior executive at Alibaba, and Jack Ma himself holds a minority stake in the company.
In fact, agreements between the two companies ensure that Alipay remains a key part of the Alibaba online services ecosystem, so it came as no surprise when in mid-December the latter company was tasked with releasing 2014 figures for the popular online payment platform:
● Alipay currently serves 300 million registered customers in China (and 17 million abroad), the company said, and processes more than 80 million transactions every day.
● 54 out of every 100 payments made with Alipay this year, up to October, were made using mobile devices (last year the figure was just 22 out of every 100).
● The regions in China with the highest percentage of mobile payments were mainly rural, where smartphones are the only means of making payments given the low penetration levels of desktop PCs. In turn, mobile payment ratios were relatively low in prosperous cities such as Beijing (29% of total transactions), Shanghai (24%) and Guangzhou (27%) compared to more remote zones, such as Tibet (62%), Shaanxi (60%) and Ningxia (58%).
● Between July 2013 and June 30, 2014, Alipay processed transactions worth 778 billion dollars.
● Alipay is able to process 10 billion transactions every day. In fact, last Black Friday it processed 2.85 million transactions per minute.
● Yu’e Bao, the financial service arm of Ant Financial that offers users the option to hold an online savings account linked to their Alipay account (which has revolutionized Chinese finances since its launch in 2013, thanks, among other things, to higher interests than offered by more traditional banks), generated total profit of 86.3 billion dollars.
The Alipay / Apple courtship
Mobile e-commerce represents one of Alibaba's main growth avenues over the coming years, where Alipay's predominance will be one of its strongest assets. This has also seen Alibaba open negotiations with Apple over a potential partnership.
Just this November the Executive Vice-Chairman of Alibaba, Joseph Tsai, said one potential future role for Alipay could be as the back-end service to the Apple Pay payment system, allowing iPhone users in China to make purchases using Apple Pay with money held in Alipay accounts.
While nothing has yet been agreed regarding Apple Pay, around the same time Alipay updated its popular mobile app to support Touch ID in iOS compatible devices (iPhone 5s, iPhone 6 and iPhone Plus). This means users can open a session on their Alipay accounts (as well as authorize payments) without having to enter further passwords.
The Apple Play/Alipay tie-up would be technically more complex, having greater impact on the strategies of the respective companies. Which is why they are taking some time to come to an agreement, following the first step with Touch ID. Neil Flynn, a stock market analyst based in Shanghai, told MacRumors that both companies would benefit significantly from the deal, seeing each take a major foothold in the other's market of origin (Apple in China and Alipay in the West).