Alibaba Still Looking Abroad with Online Payment Deal — ComputerWorld
The global ambitions of Alibaba Group, China’s leader in e-commerce, showed through as it announced a partnership with a major Chinese bank on Thursday.
Alibaba and Bank of China will cooperate on international business development as well as expanding domestic programs, Alibaba said in a statement. The deal follows a visit to Silicon Valley earlier this year by senior Alibaba executives including CEO Jack Ma. The group met with companies including Google, eBay and Amazon.com to discuss possible partnerships, and Alibaba said topics raised included bringing its online auction and payment platforms to the U.S.
The Bank of China deal gives the biggest boost to Alipay, Alibaba’s online payment subsidiary that will work with the bank to make foreign transactions easier for users.
“Alipay must globalize in the future,” Shao Xiaofeng, president of Alipay, told reporters.
Besides Alipay, Alibaba Group also operates Taobao, sometimes called “China’s eBay,” and leading business-to-business e-commerce site Alibaba.com.
Alipay will work with Bank of China to offer currency conversion for cross-border purchases, which could encourage sales between foreign and Chinese users. China’s currency, the yuan, is not freely convertible.
Alipay could seek deals with foreign financial institutions or payment providers to expand its user base abroad, Shao said. When asked if Alipay might seek cooperation with PayPal, the U.S. payment provider owned by eBay, Shao said the company was open to talks with any potential partners.
Alipay, the leading Chinese payment provider, says it has over 200 million registered users, but only about 300 of its merchants are foreign. Raising that number could be difficult.
“It’s not going to be easy to expand, but based on what we have seen so far, Alipay has the best chance of any Chinese payment provider to succeed abroad,” said Boaz Rottenberg, an analyst at Maverick China Research in Beijing.
The transaction volume in China’s third-party payment market reached 130 billion yuan in the second quarter, a leap of 140 percent over a year earlier, according to Chinese consultancy Analysys International.
Alibaba will also work with Bank of China to expand a loan program for small and medium-sized Chinese businesses. The program, expected to facilitate 6 billion yuan (US$880 million) in loans this year, gives merchants credit ratings based partly on their Alibaba transaction history. The approach fills a gap in a country where credit rating bureaus do not exist and small companies are often denied loans from state-owned banks.
Alipay also welcomed potential regulation of the payment provider industry in China, something that has been discussed for years and worried some players. Regulation could hurt smaller competitors much more than Alipay, Shao said.
But larger competitors could also be unaffected. There are about 10 significant players in China’s online payment market, and all of them are likely to receive licenses after any regulation, Rottenberg said.
All major payment providers were consulted when the government was drafting these regulations,” he said.