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Alipay Takes on Apple Pay and PayPal on Their Home Turf

A driver uses his smartphone to pay the highway toll by way of Alipay in Hangzhou, China on September 21, 2016. (Photo credit STR/AFP/Getty Images)

Ten years ago, eBay lost the battle to conquer China’s e-commerce market to small upstart Alibaba. Ten years on, China’s e-commerce market has grown more than tenfold, and Alibaba has become a global conglomerate with its arms stretching across multiple disciplines such as payments, big data, Hollywood and more.

The game of e-commerce has also changed. With proliferating smartphones, e-commerce has become increasingly mobile. Euromonitor estimates that mobile commerce will amount to $972 billion by the end of this year. By 2021, mobile payments are expected to reach $3 trillion.

This is an area where American companies are falling behind. There is no clear market leader in the U.S. mobile payments industry. Apple Pay may be the closest to being a leading player. PayPal is playing catch-up in mobile transactions. Their positions, however, may soon be challenged by Alipay, China’s largest mobile payment service provider with 450 million users.

Alipay, originally created by Alibaba, and now a part of Ant Financial, is rapidly expanding its mobile payment service to Asia, Europe and now, to the United States. On October 24, it announced partnerships with payment processors First Data and Verifone as its official entry to the U.S. market.

The speed of Alipay’s global outreach is breathtaking. Last month alone, more than 80,000 retailers in 70 countries signed up with the mobile payment system, and so did 10 international airports including Munich, Tokyo and Aukland. As the latest development, this past Friday DFS Group inked a deal with Ant Financial to launch Alipay at San Francisco International Airport.

Alipay’s strategy is to target Chinese overseas tourists who have already become accustomed to using its mobile app back home. Last year, more than 120 million Chinese traveled abroad and spent nearly $200 billion.

Retailers around the world are also eager to embrace Alipay in order to court Chinese spenders. Alipay is now accepted at British luxury department stores Harrods and Selfridges. Before long, it will be at Macy’s or Nordstrom.

What’s alarming is that Alipay seems to have no contenders. Apple Pay, PayPal, or any other U.S. payment service provider, powerlessly watched Alipay’s whirlwind foray around the world and into the U.S. market without making any attempt to combat it. Their lack of action presents a startling contrast to Alipay’s breakneck development.

Is Alipay only for Chinese tourists? I doubt it. Once it is widely accepted as a payment method in the U.S., Alipay will be in a position to challenge Apple Pay and PayPal. Currently, Alipay has already become popular in South Korea, Thailand, Hong Kong, Japan and Germany.

Ten years ago, Alibaba fought eBay cleverly and drove it out of China. Although eBay failed, it at least fought a fierce battle. This time around, however, Apple Pay and PayPal seem to have left the door wide open for Alipay to enter their home turf without even putting up a fight.

Mobile payments are the future. According to Euromonitor, by 2020, 46% of Americans will make purchases via mobile phones, compared to only 15% in 2015. If Apple Pay, PayPal, or any American payment company, wants to be relevant in the $3 trillion global mobile payments market, they must up their game and fast.

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