Alibaba certainly fits an image of “fintech” – it offers disruptive financial services technology. But its hydra-like business model is perhaps better described as ‘techfin’ – a technology driven organisation which sees data as not just something to help grow it business but as the core of its business.
Alibaba’s hundreds of petabytes of data - most of it provided by users for free - enables it to accurately calculate its user’s ethnic affinity, sexual orientation, political affiliation, social class, travel preference and much more. Indeed, much more and in more granular detail than the Australian census!
While western technology giants like Facebook or Google have enormous data pools, neither has the scope and scale of business applications exploiting them as Alibaba.
The longer someone shops on Alibaba’s ecommerce platforms the longer the data trail they leave. As a result, targeted advertising is more effective - Alibaba’s average customer places 38 orders in their first year of use; by their fourth the average is 123 orders.
Alibaba now has more sales than Walmart, EBay and Amazon combined and China’s digital payment market is over 50 times greater than that in the United States - a figure only partly explained by the lack in China of other widely available alternatives to non-cash payments.
Alipay runs off one super app which has over 80 sub-apps running of it, including consumer-to-business payments; person-to-person payments; booking and paying for taxis and restaurants; and paying utility bills.
Alipay reputedly has 450 million active customers, mainly in China. Two million Chinese merchants accept Alipay payments, which equated to 58 per cent of all Chinese payment transactions by September 2016.
In October 2016 Alipay struck an agreement with Commonwealth Bank of Australia which allows Chinese tourists and students in Australia to pay for their purchases with Alipay, in merchants who use the CBA’s Albert terminals, of which around 55,000 are in use.
With more than 120 million Chinese tourists travelling abroad every year Alipay is on the verge of becoming a worldwide digital payments provider.
Alipay is not just another only brand running on existing rails, rather it’s a new, hybrid service which bypasses the global authorisation intermediaries like Visa and MasterCard while using an infrastructure created for a different purpose. Payments using Alipay are made by scanning a QR (Quick Response) code with the Alipay app. QR codes originated in Japan in 1994 as a means of tracking automobiles during manufacture on the assembly lines.
The code was developed to allow high speed component scanning and it consists of black squares arranged in a square grid on a white background. Used on a mobile phone the QR code is presented at the point of sale and scanned by the merchant to instigate the transfer of funds from the consumer to the merchant.
This use of QR codes off-line has created a ‘codeconomy’ in China and driven the transition to a less cash society.