China’s e-commerce giant Alibaba is set to launch credit payment services to the users of its e-commerce platforms in April. Photo: Stockmarketdigital.com
Alibaba Financial, a financial services subsidiary of China's e-commerce giant Alibaba Group, is set to launch credit payment services to the users of its e-commerce platforms in April, a move to make inroads into the business dominated by traditional commercial banks.
The service will be first offered to the mobile users of Alibaba-owned Taobao Marketplace and Tmall.com via Alipay, the Group's e-commerce payment unit, giving them a credit line of between 1 yuan and 5,000 yuan, with the actual amount of credit determined based on their purchase history and transaction data on the two online shopping websites.
Of the 300 million consumers who visited Taobao Marketplace and Tmall.com through a mobile device in 2012, 57 million completed a transaction, accounting for 6.87 percent of all transactions on the two online marketplaces, up from 1.77 percent in 2011, shows a report published by Alibaba Group.
The new payment service, with a 38-day interest-free period, will facilitate online purchases, which are currently paid through credit cards and debit cards issued by commercial banks.
According to Alibaba Financial, merchants on Taobao Marketplace and Tmall.com who agree to use the service will be charged a 1-percent commission.
"We will cooperate with some banks to launch the credit payment service," said Alibaba Financial President Hu Xiaoming, calling for more participation from other banks.
Considering Alipay's large user base which boasts 80 million consumers, several joint-stock banks, including China Merchants Bank and Ping An Bank, have offered an olive branch to Alibaba and are interested in holding talks with the e-commerce giant on possible collaboration.
Until now, Industrial and Commercial Bank of China, China's biggest credit card issuer, and China Merchants Bank, the country's first financial institution to tap the credit card market, have issued 110 million credit cards but only 40 percent of them are actively used, compared with 80 million active users of Alipay.
"We are not surprised or shocked about Alibaba's push because we have realized that the company was already well-qualified to do the credit card business a couple of years ago," said a senior executive from a large joint-stock bank, adding that the bank has been consistently integrating data of its credit card users (in a bid to tackle the challenge from Alibaba).
Xie Yonglin, vice president of Ping An Bank, said, "Alibaba's credit payment service closely resembles a bank's credit card business. The only difference, or an advantage, is the mega Alipay user base and the integrated online trading data that Alibaba holds. That is a big challenge for us."
"Alibaba's credit payment business differs from personal consumption loan and virtual credit card services. In its service, Alibaba will be responsible for providing information on consumers' personal credit record, while its bank partners will provide the credit," said a source from Alibaba Group.
On March 19, Alipay claimed on its Sina Weibo that Alibaba will not issue credit cards and will not establish a bank, refuting a report by caixin.com, a Chinese financial and business news website, that the Group has got approval from China's central bank to issue credit cards to its Alipay users.
Despite the clarification, industry insiders still believe that Alibaba aims to become a fully licensed bank after accomplishing its goal of being a "bank" with limited business scope by offering the credit payment service.
"Alibaba is welcome in the open financial market if it is clearly defined by the financial watchdog as a real financial institution. We have nothing to complaint about if everything is fair," said a banker.
In 2012, Alibaba's foreign trade service subsidiary, Shenzhen One-Touch Enterprises Service, released a virtual B2B credit card, which allows overseas buyers to make credit purchases from mainland China, signaling its ambition to develop financial services for transnational e-commerce transactions.