We are used to technology transforming our lives, and most of us consider it happens rapidly. But depending where you live, the speed of change can be breathtaking.

In Australia you may remember the first time you used online banking, and how two decades later it has transformed into a mobile app on your phone. There are quite a few other links in the chain between those two points, like bill paying or asset purchasing capabilities.

But in China, for instance, that transition may have involved going from a subsistence living in a rural area with no banking or bill paying services, to living in a recently constructed city, working in a factory, and having access to all the mobile applications we take for granted in Australia. And all this in just a few months.

In a country where hundreds of millions of people have moved from poverty to middleclass in just a decade, change is breathtaking.

And of course it presents corporate opportunity.

Mobile capability transforms China to a consumer economy

Between 2013 and 2014 Alipay, China’s most popular online payment system with over 300 million registered users, handled $US778 billion in transactions. The system has a capability of 10 billion transactions a day and captures nearly half of all online Chinese payments.

Over that same period mobile accounts equated to 22 per cent of transactions, but just a year later that had risen to more than 55%.

 Alipay is focusing heavily on its mobile capability, recently adding Touch ID authentication for compatible iPhones and removing the need for a password.

But it has become much more than an e-payment system set up to facilitate transactions for customers buying goods and services from its former parent company, Alibaba and its retail sites Taobao.com and Tmall.com.

And it has a growing international presence, including opening an Alipay office in Melbourne in November last year.

At the time Alipay International president Sabrina Peng, noted the recent free trade agreement negotiated with China would founder create cross border and e-commerce opportunities for SME’s. Australia is the 5th largest online market for Chinese consumers using Alipay.

Alipay transforms from mobile payment system to looming financial services giant

While often referred to as a PayPal type service, Alipay now has capability through its app and website to access tools for operations as diverse as making payments, getting small business loans, acquiring investments or buying a plane ticket.

It is also a preferred platform for cross border e-commerce transactions, connecting global brands and Chinese consumers.

And all this wealth of user interaction is being driven by mobile applications that have bypassed internet banking. As of late 2014 China had 1.27 billion connected mobile phones out of a population of almost 1.4 billion.

Of those consumers 77% use their mobile phones to make purchases compared to a global average of 43%, according to a PwC report in May 2014.

The founder of Alibaba and reportedly China’s second richest billionaire, Jack Ma, announced plans to bring Alipay to the market in 2016 through an Initial Public Offering, with suggestions it would value the company at about USD50 billion.

Alipay was spun out of Alibaba in 2011 to bypass foreign ownership controls, but the business remains controlled by Ma through the ownership vehicle Ant Financial. Alibaba also has an agreement which gives it 37.5% of Ant Financial’s profits.

Funds raised in an IPO are expected to be used to further diversify Alipay’s offerings, including expanding a recently formed private bank, money market funds for consumers and potentially a host of new financial services that traditionally had been available only to wealthy Chinese citizens before the advent of mobile technology.

 

This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.

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