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Will Alibaba’s IPO drive Alipay to become more global?

With Alibaba’s upcoming IPO expected by many to be the largest ever, surpassing even the flotation of Visa Inc in 2008, global attention is refocusing on the rise of a regional e-commerce giant.

Central to its long term potential however will be its continued relationship with spinoff payment provider Alipay.

Spun off from Alibaba due to regulatory ‘issues’, AliPay is expected to undertake its own IPO in the near future, however Alipay remains under the ostensible control of Alibaba Founder Jack Ma, suggesting its relationship with Alibaba will remain close.

With the added momentum and pressure of the AliBaba IPO, it is certain that Alipay will continue to expand internationally and is likely to become a more visible and more competitive payments player globally.

Already the world’s largest mobile payments platform with 100m mobile users, Alipay is thought to account for up to half of all Chinese e-commerce payments and processed total transactions worth US$778bn in the year to June 30th 2014, while 78% of Alibaba’s total transactions were processed via Alipay.

Alipay however faces continued challenges with Chinese regulators who have a history of establishing increasingly rigid mandates on the online payments space, and are currently proposing placing per transaction and annual limits on online payment transactions.

Changes which have an impact on Alipay will by consequence have a strong impact on Alibaba as a group, despite now being separate entities.

As Alibaba focuses on expanding its international business post IPO, Alipay is likely to see a similar focus on international development. By growing internationally AliPay will be less at the mercy of Chinese regulators and better able to support Alibaba’s global ambitions.

It is already expected the Alipay’s escrow services will be increasingly rolled out to B2B users and Alipay is likely to renew its focus on targeting the wider Asian region, including a recent launch into Taiwan.

Alipay has already formed partnerships with several international payment providers, such as Stripe and WorldPay in a move to aid Chinese consumers spend online internationally, and these sorts of partnerships are likely to become more frequent in the near term.

By Gilles Ubaghs, Senior Analyst, Financial Services Technology at Ovum