Alipay’s Evolution From Payment to Investment: Yu’E Bao

If you’re working in the sales and marketing department of an organization that is focusing on the China market, I’m sure you’re very excited with McKinsey China’s latest forecast that the online retail economy will reach $650 billion by 2020.

And so your strategic plan, supported by the optimistic forecasts, can include the “fuel” for investing in e-commerce.

At numerous occasions, marketers have discussed the pros and cons in setting up one’s own e-commerce store, versus relying on the China e-commerce giant Taobao.

However, I’m not starting a discussion about operating an e-commerce website for the China market here. What I want to focus on is the fact that one must understand Alipay (possibly the up-and-coming biggest online financial vehicle in China), its vision, and innovation, in order to understand what’s really going on with the Chinese e-commerce arena.


The Chinese online payment gateway Alipay has announced in mid-June another game-changing service that allows users to invest the unused balance in their Alipay accounts in investment funds. The new service is named Yu’E Bao. Alipay would aggregate the balance and invest in corporate debts and government bonds, while users could get short-term gains from the micro-investments.

Alipay claimed the new service has attracted over one million user sign-ups during the first week of the launch – amid the China Securities Regulatory Commission saying on June 21 that Alipay has not launched Yu’E Bao with full compliance for fund sales in China. Alipay responded with an official Weibo announcement on its commitment to protecting users and responding to the Commission’s request in compliance.

It looks to be a win-win-win service for general users, e-tailers, and, of course, Alipay. Or is it too good to be true?

Users and e-tailers of the Alipay service are getting a new option of maximizing interim gains from their idle money that sits in their Alipay accounts. The Yu’E Bao service itself is a real innovation in investment and financial products for China. It has in certain ways gone beyond functioning as a digital currency (like Bitcoin).

And Alipay (together with its holding company Alibaba Group, and sister companies Taobao, TMail, eTao, and Aliyun) has moved one step closer to monopolizing the operation of the Chinese e-commerce value chain. Alipay’s 800 million+ registered users, and managing over 20 billion RMB worth of transactions on a daily basis, provides Yu’E Bao with an instant “plug-in” of user database and funds to operation. The launch of Yu’E Bao has certainly shocked and challenged the retail local banking and investment services in China.

In contrast, some analysts are suspicious of how far Alipay can push Yu’E Bao as an alternative investment product. Online investment has yet to gain traction in China. Some even suggested that users might consider shopping less online, as the return on investment through Yu’E Bao seemed to be more promising than putting money into the bank – so will e-tailers respond to that?

E-commerce in China has always been a fascinating topic to me. Its dynamics are constantly stimulated by the numerous breakthroughs and innovations. Hopefully, the latest developments of Alipay will motivate further advancements and push for the maturity of the digital ecosystem in China.

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