China’s Online Payment Sector Gets More Competitive

Alipay looks to continue its domination of a steadily diversifying e-commerce / m-commerce market. 

China’s online payment market is currently dominated by Alibaba’s Alipay – the site had over 100 million registered users by September 2008, which puts it in second position in the global rankings behind PayPal with over 180 million. However, Alipay is expanding rapidly, achieving its current user base in just five years. With a China market share of over 50%, Alipay now facilitates over 1.5 million transactions every day.

Alipay is following an aggressive China-based and overseas expansion program - the company has arecently established partnerships with more than 300 customers in Japan, South Korea, Europe, United States, Australia and Southeast Asia, supporting payment in 12 different overseas currencies. In August, Alipay officially launched a WAP version, aiming to tap into China’s huge mobile user base and drive up m-commerce revenues. The company has also linked up with Amazon, the world’s largest B2C e-commerce company.

Alipay doesn’t have things all its own way in China. The site has healthy competition from Tenpay, an online payment service by Tencent, the China UnionPay online payment service and 99Bill. China’s top search engine Baidu has also recently announced plans to develop its own online payment service called Baifubao, which will service the company’s new e-commerce platform which is currently in private beta stage.

PayPal itself has struggled in China, with a meagre 1.6% market share as of last year, but may be fighting back with recent deals involving CTRIP (China’s leading online travel service provider) and CITS (China International Travel Service). In more general terms, as both e-commerce and m-commerce continue to grow in popularity in China, and digital commerce applications become more sophisticated, it will interesting to see whether ventures such as Baidu’s Baifubao can really compete with Alipay’s well-established services and its push toward PayPal parity and beyond.

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