Alipay, created a decade ago as the payments unit for China's e-commerce giant Alibaba Group and since spun off, has established itself as a world leader in online and mobile payments.
Founder Alibaba Group, which retains an affiliate relationship with Alipay, recently announced it will pursue an initial public offering in the United States to facilitate its global expansion. The online retailer's IPO is not likely to have a "direct effect" on Alipay, according to Will Tao, analysis director for iResearch, but it underscores both companies' worldwide growth aspirations.
Last year, Alipay conducted nearly three billion transactions worth $148 billion in online paymentsmore than PayPal and Square combined. (By comparison, PayPal's mobile payment volume was $27 billion in 2013.) With more than 700 million registered accounts overall in China, Alipay also handles cross-border payments for 180 financial institutions in 15 currencies.
"Alipay provides a series of convenient and innovative payment products to users," says Tao. "However, its key to success [is] online shopping. It is the priority payment on Taobao and Tmall [Alibaba's online markets]. It will keep a healthy growth."
Alibaba Group said it will "continue to participate in Alipay's future financial performance, including a future IPO or other liquidity event," according to a recent press release. Alipay company representatives would not provide further comment.
Alipay is not slowing down. In January, Alipay launched the latest version of its own mobile wallet, playing to the company's eight-fold increase in mobile commerce in the past year. Mobile commerce is booming in China, where a recent KPMG survey claims that half of Internet users have used their mobile device to make a payment. The new Alipay Wallet supports purchases in physical department stores and from vending machines using sound waves to convey payment information.
This month, Alipay announced it would work with China's CITIC Bank to issue virtual online credit cards to consumers, based on their online shopping history with Alipay. The virtual credit cards could be used online and offline through the Alipay Wallet. Rival Chinese Internet company Tencent Holdings had announced it would team with the same bank to offer virtual credit cards too. However, China's central bank hastily stepped in and halted the issuance of virtual credit cards "pending a review."
Alipay has also been making moves in online personal finance as well. In February, Alipay launched a long-term financial management product. The payments player already had an interest-bearing savings account, called Yu'E Bao, which it launched in partnership with Tian Hong Asset Management. Yu'E Bao became the largest money market fund in China in less than six months, with more than 250 billion yuan under management and 49 million users as of January. The new fixed-term product, available to Yu'E Bao investors only, requires investors to make a minimum investment of 1,000 yuan ($165) for at least one year, but boasts a higher interest rate than Yu'E Bao.
Despite Alipay's strength in payments, it does not totally dominate that market, even in China, Tao says. "Other strong players exist," including Tencent's WeChat Payment, introduced last year, Tao says.
While Alipay accounts for 49% of China's third-party payment market, Tencent's WeChat Payment is seen as a strong competitor. With no access to Facebook, WeChat has more than 500 million registered mobile messaging accounts and is aggressively expanding in Southeast Asia and the Middle East.