Understanding Alipay’s Business

Alipay earns around 0.1% per transaction which is less than what banks earn on debit-card swipes.

• Because of Alipay's sheer volume in payment business, it found advantage of key resource "DATA" to drive its other businesses.
• Alipay app started as mere payment app but expanded its branches to different segments namely credit, asset management and insurance.
• Recently its credit wing overtook its payment business. 

• Alipay began consumer lending in 2014. Soon it captured 15% share of China's consumer lending market.
• Initially, it made the loans and then packaged them as securities, sold to other financial institutions. Regulators imposed restriction on the securitization.
• Later, Alipay changed its credit business model. It now identifies and assesses borrowers, but passes them on to banks which extend the loans. Alipay collects a technology service fee.

• Ant's third and fourth revenue stream is its asset management and insurance business.
• Third Leg (Asset Management): Merchants or shoppers with cash in Alipay could get small return by parking it in a money market fund. Later Ant broadened its offerings turning it into China's most powerful distribution channels for investments.
• Fourth Leg (Insurance): Partnering with insurance firms, Ant is collecting fees as a distribution platform.

Alipay is indispensable in China. However, recent suspension of its IPO and antitrust investigation into Alibaba brought new regulatory challenges for the company.