Alibaba confirmed the rumor that it would roll out online shopping credit service, called “Credit Payment”, to users on Taobao and Tmall as soon as in the upcoming April. The service will be provided by Alipay, the payments service under Alibaba Group.

Credit limit, up to 5,000 yuan ($ 800), will be decided with algorithms based on user data, such as ratings given by sellers and purchase history. Interest free periods are up to 38 days. It is reported that 80 million Alipay users are qualified to apply for it.

The service will charge Taobao or Tmall merchants who join in the program 1% of payments (currently 0.8% as a discount), similar to the level with credit cards. Over 1.3 million merchants have already been qualified and can get on board whenever they’d like to. A logo signaling it will be shown on the webpages of merchants’ stores then.

It will first be available with mobile apps — nice move for promoting mobile payments and mobile shopping.

In general it must boost purchases given a majority of Chinese don’t own physical credit cards. Also the application process is easier for users since it’s based on existing data that they don’t have to provide with detailed information required by banks and wait on shipping.

The only inconvenience? You can only use the credit to shop on Alibaba’s properties — of course, it may not be an issue for most users as Alibaba’s cover almost all goods you can think of on earth.

The user data and historical purchases are what conventional banks don’t have to leverage purchasing power to the full. What’s more, Alipay will accumulate users’ credit history along the way after the service launches. For now, only Chinese central bank has the credit history of credit card holders — again,  only a minority of Chinese consumers ever own physical credit cards.

Alibaba won’t take care of the credit with its own funds but through banks; for one thing, it’s not authorized to offer such a service. On the other hand, the company doesn’t have to worry about bad credit. For this ever-new business, it’s unclear what a regulatory process is needed. It is generally believed Alibaba has got approval from authorities as it’s not the first time it came up with such a unprecedented solution for online shopping. Years back, the company came up with the idea of holding up consumers’ payments till they confirm of receiving the goods to dissolve users’ disbelief in buying anything through the Internet without seeing a seller in flesh.

Some Chinese banks are working on “virtual” credit card. The China Merchants Bank, partnering with China Mobile the carrier, is to enable mobile devices to do whatever a plastic credit card can do. Alipay, however, said that they’d not go any further than offering consumer credit for online shopping, although its parent company launched an e-credit card for small businesses years back.

But apparently Alibaba’s ambitions on finance are going further with its newly restructured finance arm. The company expanded its micro-loan program to Guang Dong where are also crowded with small businesses last month. Zhong An, an online insurance company, will be established together with Ping An, one of the leading insurance companies in China, and Tencent, an Internet giant with huge amount of users, with Alibaba taking a 19.9% stake in the company.

Update: Hu Xiaoming, president Alibaba’s financial arm, told media later that it would only be available for mobile purchases.

Tracey Xiang is Beijing, China-based tech writer. Reach her at

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