Decoding Alipay: Mobile Payments, a Cashless Society and Regulatory Challenges

The financial industry has witnessed the so-called “fintech revolution” in recent years. Due to the emergence of information technologies such as cloud computing, big data, blockchain and artificial intelligence, the landscape of the traditional financial industry has been largely transformed. The interplay between finance and technology has resulted in various new forms of financial services and products, like online P2P lending, digital-based banking, insurtech, bitcoin as well as the burgeoning mobile payment sector. Alipay, the mobile payment service arm of the Ant Financial Services Group (hereafter referred to as Ant Financial), is a perfect example to illustrate the ongoing fintech revolution and how it is disrupting the conventional retail banking model and payment industry. This article aims to introduce and analyse the world’s largest mobile payment system as well as some of the regulatory challenges it poses. It attempts to offer some guidance for legal practitioners in banking and finance, in particular, the multi-billion dollar fintech sector.

Key points:
- Backed by the e-commerce giant Alibaba, Alipay has become the world’s largest mobile payment system. Together with Wechat Pay, they dominate China’s $5.7trn mobile payment sector. Alipay has a presence in over 70 countries including the UK, US, Japan, South Korea and Australia.
- Due to the popularisation of mobile payment facilities, many Chinese cities have become a cashless (and cardless) society, as 40% of Chinese people carry almost no cash when going out.
- Alipay relies on the Quick Response code (or QR code) technology, in contrast to the Near Field Communication (NFC) adopted by competitors like Apple Pay.
- Mobile payments and fintech have provoked debate as to legal and regulatory issues such as the regulatory approval regime, data protection, fund security and fintech financing. Most recently, China has set up a unified clearing house for all mobile payment service providers to strengthen the industry supervision.