The story of Alipay
The Alipay payment system created to serve the interests of the Alibaba Group financial empire. Founded in 1999 by Jack Ma together with 17 partners; in the first five years of its existence, the company grew to such a size that it required creation of its own money.
In order to solve the problem, Alipay was founded. It is in many ways similar to the U.S. Federal Reserve System: it issues money backed by goods independently of the Chinese state. The goods have a 100% liquidity, since a proven market demand for them exists.
Alibaba Group itself comprises several structures:
- Alibaba.com – a major online marketplace on which the whole empire is based;
- Taobao.com – online store, marketplace, and auction, all of whose goods are also available on AliExpress.com for bulk buyers;
- Juhuasuan – a daily deals site;
- PAL – new customer registration and service;
- AliExpress – online retail service.
Such a big network of Alibaba’s and its economic power, elicits a high level of customer trust in Alipay. This payment system used not only to pay for goods on AliExpress; over 500 thousand business use it to perform financial transactions.
A while ago, the company has launched a mobile payment service in partnership with China Unicorn – China’s largest cell service provider.
In 2009, the system was already used by over 200 million customers. The total of payments treated daily, reached 700 million RMB. A year later, by the end of 2010, the number of users grew up to a 550 million, and the daily turnover exceeded $385 million. In 2011, Alipay processed $46 billion of payments, including half of all online payments in China.
Alipay established partnerships with 65 banks, payment systems, and cell service providers.
A particular feature of Alipay is that vendors received the money paid by customers only after the goods delivery completed. This is the first platform to introduce this type of a trust-based system.
Alipay issues on AliExpress
On July 1, 2016, a new law came into force in China: now all accounts had to be verified. Previously, verification was needed only for transactions over 50 thousand RMB. The law was designed in such a way that only a Chinese national could realistically pass the verification, the issue resulted to Alipay discontinued providing services to AliExpress.
The issue persisted until early 2017. Customers were enraged; money that got stuck on accounts were transferred to coupons that could be redeemed within a year; sums over $30 were refunded to bank accounts, and a fee was charged for the transaction.
A lot of people started offering their help to get Alipay accounts verified. Crafty entrepreneurs charged gullible users two and even three hundred USD for help. The reason for the issue was unclear, and no explanations were offered from the management. Many worried that AliExpress itself would crumble. However, after a while everyone realized that payments using other system were still working fine. Alipay simply stopped working with foreigners, while for Chinese users nothing really changed.
Alipay kept working with Taobao, too. This site is geared at Chinese nationals, and all payments on the marketplace are carried out using AliExpress. Prices on Taobao are much lower than on AliExpress, and bulk customers must obtain accounts registered in the name of Chinese nationals in order to make purchases there. The minimum charge for verification is advertised to be around $65, but the Taobao administration frequently blocks such accounts.
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