"Minister Chang, can't you relax restrictions on third-party, cross-border payment services a bit more?" Sammy Yen, general manager of Lion Group's International Medical Tourism Services Center, pleaded with Finance Minister Chang Sheng-ford at a business luncheon on Jan. 16. "These new means of payment can boost consumer market development, enabling us to raise more tax revenue," Yen added.
In China, payments channeled through third-party payment service providers topped 1 trillion renminbi in 2010, and Chinese Internet research company Analysis International (eguan.cn) expects that figure to exceed 10 trillion renminbi as early as 2015, reflecting an enormous potential for profit growth in the money transfer business. (Table 1)
Given booming online shopping in China, Taiwan's fledgling third-party online payment platforms seem to face a promising future.
But Taiwanese players in the online payment business – be it financial institutions (First Commercial Bank, E. Sun Commercial Bank) or non-banking entities like online shopping giant PChome Online Inc. (PChome Pay) and online gaming company Macrowell OMG Digital Entertainment Co. Ltd. (Allpay) – all must look to Alipay, as either their biggest competitor or a cooperative partner.
Alipay, the online money transfer service run by Chinese Internet business empire Alibaba Group, is growing at a pace of more than 100% per year thanks to the huge spending power of Chinese online shoppers. Alipay processes a mind-boggling 6 billion renminbi in payments in China per day, and has already begun to expand its services overseas.
In February last year, Alipay became the first Chinese third-party payment service provider to launch partnerships with more than 1,000 online shopping sites, in Australia, Hong Kong, Italy, Japan, South Korea, Taiwan and the United States. Alipay users can now directly buy from shopping sites outside China and pay in the respective local currency.
At the same time, the number of Alipay's overseas users, primarily sellers and buyers living in Taiwan and Hong Kong, has tripled over the past two years.
"When Alipay started, the vast majority of money transfers came from Taobao Marketplace buyers," explains Alibaba's Sabrina Peng. An Alibaba subsidiary, Taobao is China's biggest online retail consumer platform.
"But we never defined ourselves as the exclusive payment tool of Taobao," insists Peng, who serves as vice president of Alibaba.com overseeing the company's international business operations. "Anyone who buys or sells online can be our user. Therefore, cross-industry cooperation is at the core of our development."
Today, only half of the transactions handled by Alipay are generated by Taobao. The other half stems from e-commerce on other sites.
Alipay's partners include other Chinese online shopping sites, as well as every single airline in China, plus Taiwanese carriers China Airlines, Eva Air and TransAsia Airways. It also makes good use of its huge advantages in terms of distribution channels to offer utility bill payment services in cooperation with local governments in China.