You may have heard about global companies that offer electronic payment services, such as ‘Alipay’ and ‘Paypal.’ Consumers around the world are really excited about the O2O (Online to Offline) services provided by these companies because, with these services in place, they can go about their everyday lives easily and conveniently with their smartphone, rather than a wallet. Today, I would like to introduce the company Alipay, the most successful company in China to provide electronic payment services.

Korea has always boasted cutting-edge IT technology. Yet, it has lagged behind in the development of the finance industry, particularly mobile finance. However, we are now seeing a gradual weakening of the restrictions previously imposed on this particular industry. It is interesting to note that this new trend is also affecting the Korean Wave, Hallyu. The ‘Cheon Song-yi coat’ that Jun Ji-hyun, an actress and current model for HERA, wore in one of the TV dramas caught the attention of Chinese shoppers. Yet, even though they wanted to buy the Cheon Song-yi coat, they were unable to do so! This was due to the complicated self-authentication process that they had to go through, as well as a number of software programs that had to be installed in their PC before they could use Korean online shopping malls.

Alipay, a payment service provider that assists consumers with their financial transactions, is a subsidiary of Alibaba Group, the biggest e-commerce enterprise in China. Alipay was established in 2004 after benchmarking Paypal in the United States. Once Alipay users connect their bank account and credit card with the Alipay service, they can not only transfer money or make payments on the Internet or their smartphone, but they can also pay for a variety of services, including transportation fares, public utility charges or offline shopping expenses. As a result, Alipay boasts about 820 million registered users as of July 2014, occupying more than 50 percent of the online payment market in China. The total membership vastly exceeds that of Paypal, the pioneer of the payment service industry.

The key to Alipay’s success in dominating the Chinese payment market lies in the fact that it understood early on what consumers wanted and provided exactly that. Alipay started as ‘a third party payment platform’ service based on the same concept as every other electronic wallet service. It temporarily placed payments in an escrow account held between online commerce buyers and sellers and then released the payments to sellers upon the completion of transactions. As the number of smartphone users grew and the electronic payment service area expanded, however, Alipay moved quickly to catch up with the trend by introducing a safe payment system.

E-commerce was a strange concept to people at first, with many worried about the risk of not being paid after sending out products or that they might not receive the products after settling the payment. Alipay was initially an alien concept. However, it did not take long for Alipay to reassure customers by creating a successful ecosystem in which consumers could safely engage in e-commerce transactions. Many Chinese consumers now see the Chinese online market and Alipay as synonymous.

Another key to Alipay’s success is that China has a low credit card penetration rate. The importance of this difference cannot be overstated, as it defines the uniqueness of the Chinese payment market. Many of those who have been to China for a business trip or holiday often remark that, “Even large restaurants do not accept credit cards”, or “I thought that convenient stores would accept credit cards, but they do not accept Korean credit cards.” In China, only 3 percent of the entire population used a credit card as of 2013, and the accrued number of credit cards issued continues to hover around 30 percent. Considering that one person can have more than one credit card, the credit card penetration rate is only around 10 percent of the population. As there is almost a complete absence of a credit card culture in China, the Alipay service was able to grow rapidly through its direct connection with consumers’ bank accounts.

What Steve Jobs is to Apple, Ma Yun is to Alibaba Group. Ma Yun, the executive chairman of Alibaba Group, echoed Jobs in emphasizing the concept of ‘ecosystem.’ Back then, few people properly grasped this concept, yet today many people are finally beginning to understand it through the various services provided by Alibaba Group. Alibaba Group, the mother company of Alipay, invested heavily in establishing a platform for suppliers and consumers – that is, it built a viable ‘ecosystem.’ This initiative resulted in the creation of an ecosystem that could not only tightly connect manufacturers, wholesalers, resellers and consumers, but also provide a safe payment means. And what made this ecosystem complete was Alifinance.

In March 2014, the Chinese government added two Internet IT companies, Alibaba and Tencent, to the list of 10 privately-owned demo banks, as part of its measures to develop its financial sector. In fact, Alibaba is planning to open its privately-owned online bank in March 2015. The ‘Internet Bank’ of Alibaba will focus on providing a specialized service by putting a ceiling on microsavings and microcredit, and attracting e-commerce companies and consumers as its major customers based on its cutting-edge internet technology. It is widely predicted to be an extended online version of Alipay.

It is simply not possible to prevent IT companies from entering the financial sector. Although we have not yet started using technical terms such as Internet of Things and Electronic Cash in daily lives, digital technology has already started to shape how we live and interact – even if we don’t yet realize it.

If you search online, you can easily find a way to become an Alipay member, even without owning a Chinese bank account. When you read this column, why don’t you open an Alipay account so that you can pay your taxi fare through Alipay when you come to China for a business trip or holiday?