EBay is not eBay without PayPal, and the same appears to be true for Alibaba and Alipay, but with one major caveat: Alibaba doesn’t own Alipay anymore. As Alibaba heads for an initial public offering, the role Alipay plays — and it is a confusing one — in the future of the “Chinese Amazon” appears to be crucial to Alibaba. To be sure, Alipay is no shrinking violet. In 2013, Alibaba said Alipay was the largest online third-party payment services provider in China by total payment volume. Last Nov. 11, for example, a “Singles Day” promotion generated settlements through Alipay of RMB36.2 billion (US$5.8 billion) on Alibaba’s Chinese retail marketplaces within a 24-hour period. Alipay is one of Alibaba’s leading risk factors. Specifically, Alibaba says in its IPO filing with the Securities and Exchange Commission that ”our ability to provide reliable and trusted payment and escrow services through our arrangements with our related company Alipay” is a key risk factor. But this risk factor is complicated by the fact that Alibaba no longer owns Alipay, which it launched in 2004. In 2010, Alibaba sold Alipay to two investors to satisfy Chinese regulators. Here’s where things get interesting. After reviewing the S-1, it is […]
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