Alipay expands into public transport system in China

A staff worker tests AlipayHK at a store in Hong Kong. Photo: Xinhua

Alibaba Group's Alipay mobile payment service will be applied in the public transport systems of more Chinese cities this year, after a year of trial operations in the cities of Hangzhou and Wuhan.

At a recent press conference held in Hangzhou where Alibaba is headquartered, Liu Xiaojie, general manager of public services at Ant Financial, Alibaba's financial arm which operates Alipay, announced that Alipay would be available in 2018 in the big Chinese cities including Beijing, Shanghai and Guangzhou, where the passengers can use the mobile payment tool to take subways or buses.

Alipay is a widely used third-party online payment platform in China, which allows people to complete payments via their mobile phones by scanning quick response codes or bar codes. It enjoys equal popularity with technology giant Tencent's WeChat Pay in the country. Currently, the two mobile payment service providers are competing head-to-head for the overseas market share through cooperation with global merchants.

"Starting from January 2018, every month will see new cities accept the Alipay mobile payment for bus and subway rides," Liu said at the press conference, adding that citizens in the cities of Hangzhou, Wuhan, Tianjin and Qingdao can use Alipay to take buses at present.

Besides being used for shopping, the Alipay mobile payment service is eyeing the sectors of public transportation, car hailing and bike sharing in a push to expand its footprint throughout China, as statistics showed that 240 million people take buses and 60 million people use subways in the country every day. So far, over 30 Chinese cities have constructed subway networks.

The penetration of Alipay into the public transport system would apparently undermine the business interests of the established e-payment players such as the local governments and the providers of contactless smart cards used for payment of bus and subway fares.

The South China Morning Post reported that the introduction of WeChat Pay and Alipay to Hong Kong's taxi industry worried Octopus, a provider of contactless smart card payment service for public transport and retail payment in the former British colony.

"In the past half year, many operators (of smart cards) dissed against me, fearing that Alipay's entry into the country's public transport sector would damage the interests of the established players," Liu said, admitting that the successful trial operation of Alipay in Hangzhou was a result of rounds of negotiations with the related parties.

Industry insiders said that Ant Financial must strike a balance between the bus and subway operators, the local governments and the users if it wants to widen the use of its mobile payment service in the public transport system.

Liu's announcement about Alipay's nationwide expansion came as the People's Bank of China, the country's central bank, released a regulation which sets the operational standards and technical specifications for quick response code and bar code payment services.

The regulation stipulates that the mobile payment service providers offering quick response code payment must obtain permission from the central bank, with their transactions being settled in a clearing mechanism supervised by the central bank.

Quick response codes are classified into static and dynamic ones. Banks and mobile payment service providers are required to set three levels of daily transaction limits for users based on their demand and risk prevention ability: 500 yuan, 1,000 yuan and 5,000 yuan, according to the regulation.

The central bank also set technical requirements for quick response code encryption, transaction verification and information protection to prevent cyberattacks and users' private information leakage.

In a statement seen as a response to the regulation, Ant Financial stressed the importance it attaches to the safety of users' accounts and the protection of users' interests, saying that it "will work with the supervisors to explore the new technologies that can be applied to the quick response code and bar code payments."

WeChat Pay also made a similar statement.

In December last year, the central bank said that 49 trillion yuan worth of transactions were completed through mobile devices in the third quarter of 2017, representing a year-on-year increase of 39 percent. About 80 percent of these transactions were completed on non-bank payment platforms, mainly through scanning quick response codes and bar codes.

According to statistics released by Beijing-based market research firm Analysys, Alipay accounted for more than half of China's mobile payment market as of the third quarter of 2017.

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