Alipay expands its mobile payment service to US

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Alipay, a giant third-party online payment service owned by Alibaba Group, is expanding into the US market.

Ant Financial, the Alibaba spin-off that operates Alipay, announced on Monday that Alipay has reached a partnership with First Data Corp, a US payment technology solutions company. The deal would allow consumers to use Alipay at about four million retailers in the US which First Data Corp has contracts with.

As China's dominant mobile payment platform, Alipay has been seeking to provide a wider range of services to millions of overseas Chinese. It now supports credit cards including American Express, Visa and Mastercard, and over 100,000 retailers in as many as 70 international markets accept Alipay payment.

An employee scans a quick response (QR) code displayed on the Alipay app. /VCG Photo

In addition, Ant Financial is on track to acquire MoneyGram International, an American money transfer company, for 1.2 billion US dollars. China Union Pay, China's state-owned bankcard association, is working with US payment networks to set up international standards for mobile payment.

Given all these deals and advantages, can Alipay replicate its home success in overseas markets?

US credit system poses a challenge to Alipay

So far, Apple Pay has been the leading mobile payment service in the US market. Apple Inc's CEO Tim Cook said last week that Apple Pay is available at 4.5 million retail partners in the US. Through cooperation with First Data, Alipay would achieve almost the same level of business support as Apple Pay. It also brings Alipay into direct competition with Apple Pay and PayPal in the US domestic market.

Apple Pay at a café. /VCG Photo

Li Yi, a chief research fellow at the Internet Research Center of Shanghai Academy of Social Sciences, said that Alipay's user development may have come to a bottleneck, and to break through the firm has to increase its presence abroad.

Currently Alipay and WeChat dominate China's mobile payment market, accounting for 90 percent of the market share combined. Statistics from iResearch Consulting Group indicate that transactions via Chinese mobile payment in 2016 reached 38 trillion yuan (5.5 trillion US dollars), tripling the number of 2015.

Alipay and WeChat dominate China's mobile payment market. /VCG Photo

However, American customers rely much less on mobile payment services. Forrester Research, an American market research company, found that US mobile payment transactions in 2016 only amounted to 112 billion US dollars, one fiftieth of China's. Li said that slow take up is because the US has already established a sound and advanced credit system, which would pose a challenge to Alipay.

Experts: Alipay needs to adapt to Americans' consumption patterns

Dong Ximiao, executive dean of the Research Institute of Hengfeng Bank and visiting fellow of Chongyang Institute for Financial Studies, Renmin University of China, said that Alipay will face difficulties if it does not have a good overseas development strategy, especially on US supervision of third-party payments.

Foreigners experience Alipay in China. /VCG Photo

He said the development of Alipay is closely related to e-commerce, likewise, WeChat to the social apps. Leaving those conditions out, the development would be difficult.

Li Yi also expressed concerns: The success of Alipay is deeply rooted in China. Alipay faces a new environment in the US market and has to adapt to Americans' consumption patterns and government regulations, in order to attain the same success as in China.