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Alipay is a third-party online payment platform. It was launched in China in 2004 by Alibaba Group and its founder Jack Ma. According to an analyst research report, Alipay had the biggest market share in China with 400 million users and control of just under half of China's online payment market in October 2016. A now-retracted article in The Financialist claimed that Credit Suisse claimed that the total value of online transactions in China grew from an insignificant size in 2008 to around CNY 4 trillion (US$700 billion) in 2012.
Alipay is the world's largest mobile and online payments platform since 2014.
History and overview
Alipay provides an escrow service, in which consumers can verify whether they are happy with goods they have bought before releasing money to the seller. This service was offered for what the company says are China's weak consumer protection laws, which have reduced consumer confidence in C2C and even B2C quality control.
Alipay claims it operates with more than 65 financial institutions including Visa and MasterCard to provide payment services for Taobao and Tmall as well as more than 460,000 Chinese businesses. Internationally, more than 300 worldwide merchants use Alipay to sell directly to consumers in China. It currently supports transactions in 14 major foreign currencies.
The PBOC, China's central bank, issued licensing regulations in June 2010 for third-party payment providers. It also issued separate guidelines for foreign-funded payment institutions. Because of this, Alipay, which accounts for half of China's non-bank online payment market, was restructured as a domestic company controlled by Alibaba CEO Jack Ma in order to facilitate the regulatory approval for the license. The 2010 transfer of Alipay's ownership was controversial, with media reports in 2011 that Yahoo! and Softbank (Alibaba Group's controlling shareholders) were not informed of the sale for nominal value. Chinese business publications Century Weekly criticised Ma, who stated that Alibaba Group's board of directors was aware of the transaction. The incident was criticised in foreign and Chinese media as harming foreign trust in making Chinese investments. The ownership dispute was resolved by Alibaba Group, Yahoo!, and Softbank in July 2011.
In 2013 Alipay launched a financial product platform called Yu'ebao (余额宝). As of June 2013 the company still had what it called "a minor paperwork problem" with the China Securities Regulatory Commission, but the company said that they planned to expand the product while these are sorted out.
The buyer and the seller completes all transactions through Alipay, and the process can be divided into four steps:
- The buyer selects the product
- The buyer pays for the product through Alipay
- The seller delivers the goods to the buyer
- Alipay transfers payment to the seller once the buyer indicates satisfaction with the product.
Cross-border online payments
Alipay supports cross-border online payments. This function enables Alipay users to make purchases on international merchants’ websites and in merchants’ apps with Alipay. During the purchases, Alipay is able to deduct the amount of payment from the users’ Alipay account in Chinese yuan and send the payment to the merchants in different foreign currencies.
This function is beneficial for foreign merchants who can attract Alipay users and more specifically, customers in China. It enables Chinese customers to use Alipay in other countries. For instance, Alipay users can use Alipay while shopping in Selfridges. From 26 September to 10 October 2016, Selfridges and Alipay also set a £5,000 award for consumers spending money at Selfridges with Alipay. It has been claimed that Alipay is helping London businesses cash in during their peak tourism seasons including China’s National Day. To welcome the Chinese Golden Week, a growing list of UK stores, such as The Body Shop, have implemented Alipay, which makes it easier for consumers to spend their money abroad. Traditional department stores including Harrods and Selfridges are now connecting tighter than before with digital marketing.
The "AlipayHK" mobile app was officially launched in Hong Kong on May 25, 2017. By registering AlipayHK with a local mobile number, tying-in the AlipayHK account with Hong Kong issued credit cards, or topping up the AlipayHK account with cash, users are able to pay in over 2,000 designated retail outlets throughout Hong Kong. Consumers are only required to scan the merchant QR code to complete the payment.
Paying for daily expenses
People can pay family or personal bills using Alipay online such as water and electricity bills. Customers can find the payment link in “My Applications” option, select the water or electricity company and enter the payment number, then pay the bill. When the transaction is completed, customers can find the company name, payment amount and receipt through Alipay transaction records. Besides, people also can top-up their phones or pay for the cable TV by using Alipay in the similar way.
By using Alipay, transfers can be made from one Alipay online account to another account or from the online account to a bank account (via a debit card). The user can transfer money online without face to face delivering. The transfer link can also be found in “My applications”, and it is free for the transfer between two accounts. Using the Alipay to transfer money into a bank account is cheaper and faster than making the transfer at the bank counter.
The users can save the money in the Alipay and receive some revenue on a regular basis. There is a option called “Yuebao” in Alipay, which is the project that cooperate with “Tianhong Fund”, is responsible for the financial management. The user can save money in “Yuebao” and use those money to pay, transfer or withdraw in the same day, meanwhile, people can get a small part of proceeds on a daily basis which in terms of the amount of saving money. As for the fund company, the enterprise can receive a lot of financial resources through Alipay, expanding the scale of business and attracting a large number of network customers. The Alipay can get some allowance from the fund company and also let the people rely more on the use of Alipay.
Alipay provides multiple security mechanisms to make sure that user accounts are safe. An Alipay account requires the user to set up their own login password and separate payment password, which need to be different, and the user has 5 times to enter the login password and 3 times for the payment password. Once the number of incorrect entries exceeds the limit, the account will be locked and it needs Alipay’s staff to unlock it.
At the same time, Alipay also has a binding mobile phone security measure. When the customer is using Alipay to make a transaction, they will receive a notification that their Alipay account is being used, so the user can know whether it is their own operation.
“Alipay real name certification” is a kind of identification service, which can help check the identity of the buyer and seller, and their bank account information.
Alipay also installs a digital certificate, which can encrypt information sent over a network, preventing hackers from stealing passwords, thereby enhancing the security of online transactions.
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