Alibaba Develops Online Payments With Bank of China

Partnership Could Boost Domestic Consumption and Exports

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BEIJING ( -- Alibaba Group, China's largest electronic retailer, has formed a long-term strategic alliance with the Bank of China to develop the Alipay Card, a smart card issued by Asia's largest online payment platform, and a trust rating system.

China still lacks a developed credit card market. The two companies will jointly develop Alipay Card, a smart card from Alibaba Group's subsidiary Alipay, Asia's largest online payment platform, and a trust rating system.

Chinese banks issued 52 million credit cards in 2008, a 57.7% increase over the previous year, bringing the total number of cards to 142 million at the end of 2008, according to Research and Markets. But the average number of cards per capita is just 0.1, compared with 4.39 credit cards per person in the U.S.

China's banking system lacks a credit-rating program and most Chinese still earn low salaries, making it difficult to issue cards on a mass-market basis. That means most online shoppers in China, which now has 338 million internet users, need alternate forms of payment.

Most consumers own a China Unionpay debit card, but those cards are issued by various local banks and are not always accepted on local web sites, making third-party systems like Alipay valuable e-commerce tools. Alipay had a registered user base of over 200 million in June 2009, more than eBay's PayPal, the most popular online payment service in the U.S.

Helping factories find overseas buyers
Besides Alipay, Alibaba Group runs, the world's leading business-to-business e-commerce company, and, China's biggest consumer e-commerce company. is working with advertisers such as Procter & Gamble Co. to develop branded online retail stores. The group also operates Yahoo! Koubei, a company providing online classified listings for local services and search, and, an internet-based software company targeting small and medium-size business in China.

Beyond developing China's online payment options, Alibaba and Bank of China hope to foster cooperation between local factory owners and buyers in cash-strapped western countries, developing small business financing and joint marketing initiatives to pump up China's economy at a time when exports to overseas retailers like Wal-Mart have taken a major tumble.

Jack Ma
Jack Ma
Alibaba's alliance with Bank of China will "leverage that institution's expertise, to help our small business customers to expand their marketing and sales on a global basis while at the same time also educating ourselves so we can serve our customers even better in the future," said Jack Ma, Alibaba's founder, chairman and CEO.

The two companies are already partners. In early 2007, Alipay and Bank of China started an overseas payment service to let Alipay users buy products and services from hundreds of merchants outside China. In April 2009, Alipay introduced online banking services, allowing customers of Bank of China to shop online and pay utility bills using Alipay.

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