How Does Alipay Make Money? The Alipay Business Model In A Nutshell

Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrows transaction fees, a range of value-added ancillary services, and through its Credit Pay Instalment fees.

Origin Story

Alipay is a Chinese mobile and online payment platform.

It was created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. In this capacity, Alipay also served as the B2C component of Alibaba Group.


After eBay acquired Chinese eCommerce company EachNet, Taobao made moves to secure competitive advantage by increasing the trust between the buyer and seller. At the time, this was the most pressing issue in the Chinese eCommerce market.

Alipay is one of just three central digital payment providers in China, serving as the brand of parent company Ant’s consumer finance app. There are reported to be approximately 1.3 billion annual active users of Alipay globally, with the vast majority being Chinese citizens. The company also has customers in e-wallet partner countries, including Malaysia, Indonesia, Pakistan, Thailand, and South Korea.

Alipay revenue generation

As noted earlier, Alipay revenue generation is focused on increasing trust between the buyer and seller. In many countries this would not be profitable, but commerce in China traditionally involved cash purchases in brick-and-mortar stores.

Such was the lack of trust in other forms of payment that a merchant would not ship a product until it was paid for. A buyer, on the other hand, would only pay once they had the product in their hands.

With all of that said, let’s look at how Alipay makes money and has revolutionized Chinese commerce in the process.


Alipay offers an online escrow system that holds the buyer’s funds until they have received the product

Information concerning real-time payment and delivery is tracked and shared with both the consumer and merchant.

For small-time users, the escrow service is free. For transactions over 20,000 CNY – or just over 3,000 USD – merchants are charged 0.1% per transaction. Note that this is substantially lower than competitors such as PayPal, who charge around 3% irrespective of the transaction amount.

Value-added services

Consumers using Alipay wallet also have access to a range of ancillary services, including:

  • Train ticket purchasing.
  • The ability to check balances on connected bank accounts.
  • Utility bill payments.
  • Insurance.
  • Mobile phone credit purchasing.
  • The ability to make offline payments in affiliated Chinese shops and websites.
  • The ability to split restaurant bills with friends or family.
  • Credit card servicing payments. In this case, Alipay charges a 0.1% fee for all monthly credit card payments exceeding $299.

Depending on the product or service, Alipay charges an average merchant transaction fee of 0.55%.

It also collects interest from the funds sitting in customer accounts.

Credit Pay Instalment

Alipay also extends credit to consumers via the Credit Pay Instalment facility.

Similar to a BNPL service, consumers can pay for goods and services over 3, 6, or 12 installments. Alipay charges 2.30% for the three-installment plan, while the 12-installment plan attracts a charge of 7.50%.

Key takeaways

  • Alipay is a Chinese third-party transaction facilitator. It was created by Jack Ma to establish trust between the buyer and the seller in the cash-dominated Chinese market.
  • Alipay is primarily an Escrow service that holds payments until goods are delivered. It charges a flat 0.1% for transactions over a certain amount. Smaller, less frequent transactions are free of charge.
  • Alipay also offers an extensive range of value-added services, including insurance, utility payments, and credit cards. The platform also enables consumers to purchase on credit and pay back over a predetermined period.

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