Mobile frontier
As use of the Internet with mobile devices becomes ever more popular, Alipay.com Co, the country's leading third-party online payment povider, is aiming to move into payments at offline shops.
"We have already made efforts with offline shops but are waiting to see the feedback before we can say which solution is suitable in a specific (offline payment) scenario," Zhu Jian, a member of the PR staff with Hangzhou-based Alipay, told the Global Times on November 25.
According to Internet consulting firm Analysys International, Alipay had a 47.3 percent share of the domestic online payment market by the end of the second quarter this year, followed by Tenpay and UnionPay with 20.5 percent and 11.2 percent, respectively.
New method
Shoppers at the Beijing-based outlets of discount shopping center Shopin no longer have to queue up to pay.
Anyone with a smartphone with the Alipay app installed can go to the shop assistants instead, according to a message broadcast on loudspeakers at a Chaoyangmen outlet of Shopin on November 25.
The assistants have gadgets on which they enter details of the goods customers want to buy. A corresponding QR (quick response) code for these goods then appears on the gadgets' screens. A QR code is a two-dimensional bar-code readable by QR bar-code readers and smartphones.
"You use your smartphone to take a picture of the QR code, and enter your Alipay account name and password via the Alipay app, and the purchase is done," a shop assistant at the Chaoyangmen outlet told the Global Times.
In Beijing, all the eight outlets of Shopin and some outlets of New World Department Store have adopted the new payment method, Zhu said.
As well as buying clothes or shoes in department stores, Alipay can also help cover taxi fees.
"The company (Alipay) is making QR codes for each of us, which correspond to our Alipay accounts," Yuan Fabao, a 33-year-old taxi driver in Hangzhou, Zhejiang Province, told the Global Times on November 25.
The taxi driver and some 120 others in the city have offered payment using Alipay and free Wi-Fi services in their taxies for over one month.
More money offline
The total sales for domestic B2C businesses reached 179 billion yuan ($28.8 billion) in 2011. Some 70 percent of the transactions on B2C sites like 360buy and Dangdang were paid for by payment upon delivery, data provider iResearch said in April this year.
Payment upon delivery using bank cards is growing fast and has enormous potential, according to iResearch.
Meanwhile, the proportion of online payment is dropping and will fall to 15.8 percent in 2015 from 46.3 percent this year.
"Compared with the online payment market, the offline one is much bigger, so online payment providers are eager to elbow their way into the offline payment market," Zhang Meng, a third-party payment analyst at Internet consulting firm Analysys International, told the Global Times.
On March 19, Alipay announced it would release its own POS (point of sale) devices. This move was widely seen as a symbolic step by Alipay into the offline payment market. Alipay said it would pour in some 500 million yuan to promote the payment solution, even though it does not expect a return on the investment in the short term.
As well as Alipay, other online payment providers have also been nosing into the offline payment market over the past two years.
For instance, payment provider 99Bill joined hands with ZJS Express in 2011, and offered over 10,000 99Bill POS terminals, according to a report in March by IT portal it168.com.
Stiff competition
Alipay's offline payment business will surely encounter competition and pressure from banks and bank card association China UnionPay, which still dominate the offline payment market and have their own POS business.
"It is impossible for Alipay to threaten any of these dominant offline payment providers in the short term as it takes a long time to persuade customers to accept a new payment method," said analyst Zhang. But it does not mean there is no chance for new players like Alipay.
"In third and fourth-tier cities, where POS terminals and payment by credit or debit card are not so commonly used, the chances of promoting Alipay POS terminals or other Alipay apps would be higher than in first and second-tier cities," said Zhang.
Taxi drivers in Hangzhou said they preferred the new way of payment via the Alipay app to traditional ones like paying in cash or using the IC bus card.
"The process of paying using the Alipay app takes several seconds, even quicker than paying by cash," said Yuan, noting that the method "also avoids the risk of getting fake money."
Compared with using the IC bus card, the Alipay app enables cab drivers to "see" the money entering their Alipay accounts, as they are sent reminder messages.
"In the case of passengers using the IC bus card to pay us, we won't get our money until 20 days later. And if there is a miscalculation (of the payment), we need to visit four different departments to correct the mistake," Yuan complained.
Alipay's new payment mode has so far met with a mixed reception in the market, the Global Times has found.
"I would feel unsafe to enter my Alipay account name and password with a taxi driver sitting just next to me," a Beijing resident surnamed Liu told the Global Times, noting that there have been reports of safety risks with the Alipay Quick Payment service.
Quick Payment facilitates the online payment process by removing the need to enter bank card passwords to withdraw money from a bank account. But it also presents risks because of the simplified withdrawal process and fewer requirements for identification information.
Nonetheless, Alipay has roughly 100 million users of its Quick Payment service so far, the company said on November 22
"Alipay needs to address two bottlenecks before expanding its offline payment service: one is to improve the safety of its Quick Payment service and the other is to lift the current payment limitation for each transaction," said analyst Zhang.
Alipay has said that it intends to focus on developing its apps for smartphone payment in shops and taxis in the future. "But how well these new apps will be accepted by customers is still uncertain," Zhu admitted.