How does Alipay make money? Let’s find out.
The financial services industry is one with lots of opportunities for innovation and investment.
Among the drivers of innovation in the payment solutions industry is Alipay. This system of payment was developed by China’s Alibaba. It has been identified as the world’s number one mobile payment service organization as well as the second-largest payment service organization in the world.
However, rather than focus on its history, we will be discussing how it makes money. A huge company like Alipay that processes payments should create some level of curiosity about how it generates its revenue.
How It Works
Alipay has similar functions to a deposit account. However, it has lots of added features that make it easy to process payments for goods or products bought. This tool comes in the form of a mobile app and can also be used on a web browser.
What’s more? Money kept in your Alipay wallet attracts interest.
This payment vehicle for Alibaba operates an online escrow system. This means your money is held safe until you take delivery of your goods or products. The money lies in this escrow system until a period of 7 days elapses.
If no complaint is received from the buyer, the amount is then credited to the seller.
How Alipay Make Money
As a huge facilitator of financial transactions, Alipay also earns or generates lots of revenue from the services it provides. This company targets the consumer. As such, it has provided all sorts of financial solutions ranging from savings, loans, online and offline services.
For each of its services, a service fee is charged. China, with its billion-plus population, creates an enormous market for Alipay. It is the biggest online commerce payment vehicle in China which automatically earns it a lot of revenue.
Not only is online commerce dominated by Alipay in China, but also a wide range of other services such as cab-hailing services among several others. The financial ecosystem built by Alipay makes it the biggest payment solutions earner in China.
Small users of the Alipay payment platform are exempted from transaction charges. This is paid by bigger users.
The escrow service it has incorporated into its operations makes Alipay a trusted payment solutions provider. This has attracted huge growth in the number of users and ultimately in the total revenue generated.
Secrets To Its Success
Alipay has been quite successful in most areas of its operations. This can be attributed to several things one of which includes its low transaction costs. Compared to other big players such as PayPal, Alipay’s transaction costs are significantly low.
Amounts exceeding 20,000rmb (which translates to $2,824) are charged 0.1% per transaction. This is substantially higher for PayPal which charges about 2.9% per transaction for the same amount. This has placed Alipay at the number one spot ahead of PayPal among Chinese shoppers.
Another reason for Alipay’s success is its model of operations. This payment solutions provider operates as a bank in the sense that users earn interest simply by depositing their money in its wallet. This gives it an enormous advantage over its competitors.
Hardly do you get the opportunity to keep your money and earn interest on it from other payment solutions providers? This operational model has made it a preferred option for online shopping for lots of customers.
As a part of the Alibaba ecosystem which has been built over the years, it processes huge online financial transactions while also earning lots of money. Its profitability has continued to witness a steady climb and looks set to continue its growth for a long time to come.
Although a part of Alibaba, Alipay is run by Ant Financial. One of Alipay’s major successes has come from the user experience. This has been carefully designed in a way that users are offered lots of options to pay not only for shopping but also make other financial transactions.
Alipay users get to pay for train tickets, check balances on connected bank accounts, make utility bill payments as well as top up mobile phone credit. Users are also able to make offline payments in shops and Chinese websites among other applications.
Alipay’s Five Year Plan
Although Alipay stands as the world’s number 1 mobile payment service, it still has its sights set on further expansion. This company has set a 5-year plan in which it intends to reach more than a billion annual active customers by the end of the fiscal year 2024.
This is an ambitious plan it is currently working towards.
This simply shows how growth-focused the company is. Hence, it’s not surprising the level of growth it has achieved over the years. Achieving this objective also comes with enormous earning potentials. This will impact significantly its revenue and profits in the long run.
Opportunities For Growth Beyond China
Although not quite popular outside of China, Alipay is spreading its services to more destinations beyond its current areas of coverage. This includes adding more users. Currently, it has over 300 million users outside of China.
This keeps growing with continued dedication by the company to widen its operations.
The daily active users of Alipay has clocked the 320 million mark. Active monthly mobile users of this service number around 150 million. These are huge stats that keep improving. As of 2014, it calculated its all-time transactions at 42.3 billion since inception.
Alipay’s share of China’s mobile payment provider market has also seen an uptick with a total transaction value of 68.7%. This is fueled by its robust ecosystem designed to attract increased convenience in payment services.
Understanding how Alipay makes money is best achieved by following its operational model. We have included vital information on the structure it has created for easy transactions, including the charges on each transaction.
Such charges, as we’ve seen are among the lowest when compared with other competitors like PayPal.
The development of innovative services has also contributed greatly to creating more revenue streams for the company. With a continued drive for growth and excellent services, the future only looks better for the company.