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PayPal Alternative? Alipay Tops $150 Billion in Online Payments

Sites include , . Published on December 4th, 2012. Written by Anthony West.

PayPal has ruled the roost where online payments are concerned but in recent years a few credible players have popped up in earnest opposition to the eBay-owned online payment processor.

One such player is Alipay, a subsidiary of the Alibaba Group which has been creating quite a stir in China. Now to be fair, PayPal’s presence in China is not as pronounced as Alipay, but given the convergence of shopping markets and channels, both companies are easily direct competitors with one another.

Alipay’s phenomenal third quarter

The third quarter numbers for Alipay is extraordinary by any stretch and the company posted a record $150 billion in transaction volume over the period. In market share terms, this growth represented a 47% capturing of the online payments market and analysts are pointing to greater growth come Q4.

The record growth comes as other players in the Chinese market have stepped up their game in the past year to meet the growing demand for online payment solutions in China. Second in the running for market dominance was Tenpay—it finished off the quarter with a 20.4% market share. Unionpay Online closed out the top 3 with a 11.5% market share. While PayPal wasn’t used enough by the Chinese to warrant a top 5 listing, the numbers generated by Alipay are significant for online payments in the West.

Why PayPal should be worried

The biggest threat to PayPal’s dominance is the fact that the Alibaba Group is no stranger to Western commerce. The company was heavily invested in Western ecommerce through its dealings with Yahoo and while that partnership didn’t survive into 2012, the Group has proven credentials. Should Alibaba make a push to establish Alipay as an alternative in the Western market, it perhaps wouldn’t take much for the Group to build a strong customer base. What’s more, Alipay has robust infrastructure and you certainly don’t process $150 billion worth of payments in a quarter without having some sound mechanisms in place.

Alipay has also proven itself as robust alternative for handling huge volumes of mobile payments. To date the company’s mobile payments application has been downloaded 30 million times—a fact that stateside competitors like Square will have to pay attention to in the coming years. How Yahoo must be ruing the day it let things fall apart with Alibaba; the company’s well placed position now could have been the perfect springboard for Marissa Mayer to use for the much-needed Yahoo comeback.

Alibaba has been rather quiet on the Western front regarding expansion but this doesn’t mean the group isn’t thinking about making a play for Western markets. Recent expansions in Asia, including the opening of an e-commerce school in Bangkok may be the initial rumblings of a much louder effort. In this regard companies like Square and PayPal can rest easy and it may be several years yet before Alibaba takes its competing products to mainstream Western markets. Alipay on the other hand needn’t worry too much about its competitors coming to eat up its market share after such a Q4 performance. It would take a monumental effort (and lots of time) to unseat the 47% stranglehold that Alipay has on the Chinese online payments market.

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