Lately Alipay, escrow payment division under Alibaba, has gradually rolled out its hidden ambitions of internet finance. First its online mutual fund for small scale investment, second a virtual credit card specifically for online shopping, all aim at attracting the money from Alipay users. We are not sure what plan might come next. Some big boys from financial industry got a bit uneasy and wondered since when an e-commerce company is straddling this sector of business. Others perceived Alibaba is innovating the internet finance, though would not cause much landslide change. Opinions would vary, however we never should underestimate the influence from Alibaba. It often quietly lurks behind and makes prudent moves, as its founder Jack Ma described “a crocodile in Yangtze river” and that is how it even drove Ebay out of China.
Believe or not, people outside of mainland China are often amazed at the success of third party payment Alipay. When I was in Taiwan during a Conference presentation, they asked me whether Alipay-like services might achieve similar success in Taiwan since their government is starting to loosen tight grip and regulation on online third party payment system.
My answer was “The monumental success of Alipay is purely built upon the entrenched distrust between online shoppers and merchants in China; in the very beginning Alipay was mainly to facilitate C2C auction, to act as a sort of impartial arbiter to mitigate mutual distrust, then this payment habit maintains and even infiltrates into B2C as well. Till this day, unlike other countries, Chinese online consumers do not prefer credit card payment for e-commerce transaction. Does such scenario apply to Taiwan?”
Anyway, as long as Taobao reigns as the King of e-commerce in China, habitual addiction to Alipay would stay untouched. Alipay already offers online services like bill payment, money transfer to different bank accounts etc, without extra charge, which further strengthened the loyalty from its users. When the loyalty and popularity of your payment system are that much solid and pervasive, it is about time to do something; something about encroaching the territory usually reserved for traditional financial players.
The trouble is when our e-commerce giant boy has the power and dream to do this, will Mommy and Daddy give ultimate approval? After all China is a heavy-regulated financial market and it is said our e-commerce boy often needs to maneuver these moves in a grey area right now. Regulators’ endorsement will definitely determine the future course of this budding trend.
For better or worse, Alibaba is a trailblazer in this movement of e-commerce going internet finance in China. Many are already prophesying that in future digital will fundamentally change the way how we do finance today, and some internet companies will impose themselves as huge challenges to banks. Therefore even without a clear “legal green light” in this country at this stage, the desire of new internet finance is in the offing and seems inevitable.