{"id":20514,"date":"2016-11-18T17:52:54","date_gmt":"2016-11-18T22:52:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/alipay-wining-the-payments-game-in-china\/"},"modified":"2016-11-19T09:28:46","modified_gmt":"2016-11-19T14:28:46","slug":"alipay-wining-the-payments-game-in-china","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/alipay-wining-the-payments-game-in-china\/","title":{"rendered":"Alipay: Wining the Payments Game in China"},"content":{"rendered":"

China Back in 2000s <\/strong><\/p>\n

Emergence of E-commerce <\/u><\/em><\/p>\n

Before 1999, payments in China were mostly made with cash in brick and mortar stores. Seldom did consumers know e-commerce as a purchase channel, let alone using online payment services. Jack Ma founded Alibaba, the first official business-serving e-commerce platform, \u00a0in his apartment in Hangzhou in 1999. Riding on the initial success as a B2B platform, Alibaba expanded into C2C and B2C segments to serve a larger client base. With the development of technology and increase of disposal income, more consumers were inclined and open to the idea of purchasing online.<\/p>\n

Deficit of Trust<\/u><\/em><\/p>\n

However, payment remained as\u00a0the biggest barrier to grow the business. \u00a0Consumers in China were so used to pay after transaction and sellers wouldn\u2019t ship the product unless payment was made. A creditable and trust-worthy payment system was called for to address the issue and protect the benefits of both parties in a transaction. Jack Ma gave Alipay as the answer.<\/p>\n

 <\/p>\n

What is Alipay?<\/strong><\/p>\n

Business Model \u2013 Tackling the Issue of Trust <\/u><\/em><\/p>\n

Alipay offers an online\u00a0escrow<\/strong>\u00a0system. Consumers\u2019 payment is made to and held by Alipay until he or she have received the product. The merchant has confidence the cash is there before dispatch, and only receives payment if consumers do not complain within 7 days of delivery. Real-time payment and delivery information are tracked and shared with both consumers and merchants.<\/p>\n

Unlike PayPal, Alipay is\u00a0free<\/strong> for smaller users\u00a0of its platform. Alipay is operating as a facilitator and effectively \u201csubsidizing\u201d smaller users. It profits mainly from cash flow (consumers pay to Alipay once an order is placed and Alipay pays to merchants weekly or monthly), advertisement and other value-added services.<\/p>\n

\"picture1\"<\/a><\/p>\n

Exhibit 1 – Alipay’s Escrow System<\/p>\n

Operating Model \u2013 Wrapped around Online and Offline<\/u><\/em><\/p>\n

The original operating model is centered around online payment facilitation on Alibaba. Now Alipay becomes a go-to-place<\/strong> that covers a great variety of payment needs in people\u2019s daily life and it is still evolving through mobile development, partnership and innovations.<\/p>\n