The Power of Alipay...

We know there just was an election that was kind of important, but last week there was another fascinating day of an entirely different nature: Singles Day on November 11. Singles Day is a made-up holiday in Asia that started as a way for young people to celebrate being single (since the date is written 1-1-1-1). However, since its origins, Singles Day has morphed into the globe’s biggest online shopping day. In China, massive sales and promotions get rolled out for 24 hours of unbridled spending.

Last week on Singles Day, Chinese shoppers bought $17.8 billion of merchandise online – and impressively, $12 billion of that was sold through Alibaba, China’s biggest online commerce company. To put that in perspective, in a single day Alibaba sold more than one and a half times last year’s total U.S. online sales on Thanksgiving, Black Friday, and Cyber Monday combined. Say what you will about the hype -- Alibaba brought in Katy Perry, Kobe Bryant, and Thomas Mueller for a live televised launch event at midnight – but the power of China’s consumer class is undeniable.

Perhaps even more fascinating, however, is the ascent of Alipay, the online and mobile payment service that Alibaba started to support its marketplace. On Singles Day, Alipay processed over one billion transactions. To put that in perspective, market leader Visa reported processing 83.2 billion transactions around the globe last year – or an average of 228 million transactions a day.

In China, the smartphone is the way to pay. PricewaterhouseCoopers found that 55% of Chinese consumers expect their phone to be their main method of payment for purchases – which is entirely different from the U.S., where mobile wallet adoption has been slow. Although there’s been a lot of buzz around Apple Pay and other mobile payment forms here in the U.S., none have really taken off. The issue is that their value proposition isn’t clear. They don’t necessarily speed up checkout in stores, offer more convenience than credit or debit cards, provide better security, or give enough meaningful loyalty rewards or other benefits. Plus, the market is so fragmented that picking which wallet to use has been confusing.

In contrast, Alipay absolutely dominates China. It has leading market share and 450 million active users. In addition, its huge user base allows it to offer other financial services like loans and money market accounts through its parent Ant Financial -- and that in turn only makes it more useful to more users.

Mobile wallets make sense in countries with low credit card penetration and high cash use, like China. Originally, many Alipay accounts were set up to enable shopping on the popular Alibaba sites Taobao.com and Tmall.com. But soon people found that using Alipay to pay their rent and utility bills surely beat the old way of standing in line at three different banks. That’s why China is leapfrogging checkbooks and online banking as we know it.

Now Alipay is expanding internationally by aggressively forging partnerships with retailers and payment services like Verifone, Ingenico, and First Data.  Today Alipay is accepted at 80,000 merchants in 70 countries. Its goal is to get to a million merchants in the next three years.

Alipay may have a shot at winning over the global payments market too because of one huge advantage – the massive numbers of Chinese who are travelling abroad. Alipay isn’t going head-to-head against local payment services for now, but focusing instead on the large numbers of Chinese tourists traveling internationally – a number set to double by 2020. Plus the Alipay app offers other value-added services like information on local restaurants, attractions, and shopping. For active Alipay users, the value proposition is clear. When they find they can use Alipay as easily at Harrods in London or 7-Eleven in Bangkok as they can at home, transaction volumes could increase in a big way.