AlipayTen years ago today Alibaba founded Alipay, an online payment and escrow service, to address Chinese consumers’ concerns about online shopping, 19 months after the establishment of Alibaba’s Taobao online marketplace. Now Alipay the payment service is just one of many internet-based financial services under the Ant Financial Services Group.

Alipay escrow service withholds a payment until either the consumer confirms receipt of the goods ordered on Taobao or until ten days after shipment of physical goods, if the consumer doesn’t want the bother of personal confirmation. (Normally any parcel from any corner in China will be delivered within ten days).

As well as transactions on Alibaba’s online marketplaces, Alipay also powers third-party services. Payments processed on Alibaba’s retail marketplaces for the domestic market (Taobao, Tmall and Juhuasuan), though providing around 80% of Alibaba’s total revenue, only accounted for about 38% of Alipay’s payment volume in 2013. Of course, not every payment on Alibaba’s retail marketplaces were through Alipay –  about 22% of the trade volume in fiscal year 2014 wasn’t settled through Alipay.

Created for the trade of physical goods on Taobao, Alipay however would go on to enable a variety of features: bill payment, money transfer, payment of utilities and credit card repayment, amongst others. It supports payment through methods such as QR Code, voice and fingerprint.

Since Alipay.com launched on December 30th, 2004, the service has gained more than 300 million users, about half of all Chinese internet users (China had had 632 million internet users as of June 2014, according to CNNIC). With more than 200 partnering financial institutes, Alipay handles over 80 million transactions daily. Daily mobile transactions surpassed 50% of the total as of October this year.

Alipay Wallet

Alipay Wallet, the full-fledged mobile app which evolved from Alipay’s mobile version, became an independent brand in November 2013. In contrast to the Alipay service on PC, Alipay Wallet has a local lifestyle service channel and a “Service Window”. With the lifestyle channel, users can buy digital membership cards, travel products, movie tickets, or book taxis from partnering businesses, while the Service Window is for merchants to send deals or promote content to subscribers.

The app had 190 million annual active users (>1 payment or money transfer in past 12 months) as of October this year.

Alipay Wallet App

Alipay Wallet App

Alipay Wallet began actively expanding to offline from last year. It now supports payments for taxis and public transport, and is available at vending machines, convenience stores, department stores, pharmacies, hospitals, and parking lots.

Three months ago, Alipay Wallet unveiled over 60 APIs, encouraging third-party software developers to create applications or services for the app or to integrate its capabilities into their own mobile applications.

Global Expansion

Alipay has sped up its global expansion this year. It is available in brick-and-mortar stores in Hong Kong, Taiwan, and other regions. Chinese consumers are able to use it for purchases from Korea, Japan and U.S., or receive tax refunds after shopping in Europe.

Last week Alipay announced that it supports the purchase of local transportation cards of Macau, Thailand, Singapore and South Korea. Alipay Australia was announced last month.

Not an Alibaba Company Anymore

The business unit Alipay belongs to was spun off from Alibaba in 2011 and now is under majority ownership of Alibaba chairman Jack Ma and a partner of his. Alibaba claimed this was a response to regulations by the Chinese central bank which signalled they would only issue payment business licenses to “domestic PRC-owned” companies. The move greatly angered Yahoo! who then had a 40% stake in Alibaba, saying they were not notified of the transfer.

Alibaba now pays Alipay an annual fee for payment processing, and Alipay also pays Alibaba annual fees for royalty and software technology. In the fiscal year 2014, Alibaba paid Alipay US$378 million and later received US$284 million back.

Jack Ma said last month that he hoped to see the Alipay company go public in the mainland.

antfinancialAnt Financial Services Group

The spinoff was first called Small and Micro Financial Services Company and then this October renamed Ant Financial Services Group.

Apart from Alipay, the group also operates a small loans business, established in 2010 and now called “Micro Online Loans”, that supplies credit to retailers on Taobao. Loans are granted based on the retailers’ records, such as sales and customer ratings, which Alibaba is able to track.

Yu’ebao, a mutual fund launched in June 2013 for Alipay users, is regarded one of the most important developments in China’s financial markets during the last year. It makes purchasing mutual funds far easier than before, as users need only open its page on Alipay and deposit money, without the need to file papers with traditional financial institutions. A mutual fund company in which Alibaba has a majority interest is managing the fund. One year after launch, over 100 million users have purchased RMB 574.1 billion (US$92 billion) worth of Yu’ebao funds, according to Alipay.

In April this year, Zhao Cai Bao, a platform for third-party financial institutions to launch online products like Yu’ebao, from insurance and small loans, for individuals or SMEs, was launched.

Ant Financial is building a credit scoring system leveraging purchasing and user data collected by Alibaba marketplaces, which is expected to help financial institutions including Ant Financial itself make credit decisions.

Ant Financial Services Group received regulatory approval to set up a private bank, named MYbank, this September.

 

Editing by Mike Cormack (@bucketofontgues)