Alipay plans overdraft payments

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By Zhang Ye (Global Times) 09:25, August 09, 2013

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Alipay.com, a third-party online payment platform under domestic e-commerce giant Alibaba Group, said Thursday that it plans to introduce a credit payment service into the market next week that it hopes will increase the success rate for online payments via mobile devices.

The service allows users to pay for online purchases with overdrafts from their Alipay accounts instead of using credit cards or debit cards, Zhang Daosheng of the Alipay public relations department told the Global Times Thursday.

The company will decide how much credit to give to users based on analysis of their online shopping data, said Zhang.

Media reports said on Thursday that the maximum overdraft will be 5,000 yuan ($817) per account, which Alipay will fund via loans from banks.

The payment mode will generate additional fees, from 0.8 percent to 1 percent of the cost of each deal, which will be paid by either the buyer or the seller, according to the reports. If users fail to repay the overdraft within 38 days, they will be fined at 50 percent of the benchmark interest rate.

Zhang declined to comment on these specifics, but said that more details will be revealed within a week.

Credit card payments on alipay.com also generate additional fees at a rate of 1 percent, and some 20 percent of the overall transactions on the platform are settled via credit cards at present, according to data the company sent to the Global Times Thursday.

The company's move aims to simplify payments via smartphones or tablets, said Zhang, noting that the current success rate of such transactions is only 38 percent.

Many online shoppers cancel their orders due to bad payment experiences on mobile devices, but the situation is not easy to change due to the lack of a well-established online payment system in the mobile Internet, Wang Weidong, a third-party payment analyst with iResearch, told the Global Times Thursday.

Zhang also noted another reason for launching the service. "Some people are not qualified to get a credit card from banks, but have good credit on our online shopping platforms. We want them to experience online payment on credit as well," he said.

Wang, however, is concerned that Alipay is likely to face some financial risks.

"This service will surely benefit online shoppers, but it is risky to give credit to shoppers based on their shopping data alone when there has been no mature data analysis system for this purpose yet," he said.

This is yet another big move for Alipay in furthering its online financial business, and comes on the heels of its June 13 launch of Yu'ebao, China's first fund investment platform for online shoppers.

Zhao Xijun, deputy director of the Finance and Securities Research Institute at Renmin University of China, told the Global Times Thursday that in the face of competition from Internet companies, banks need to put more effort into developing their online businesses so as to gain a firm foothold in the emerging online financial sector.