Online payment services in China: How does Alipay differ from PayPal?

First posted: Dec 19, 2013
Last updated: Jan 14, 2020
Misha Maruma

PayPal and Alipay logos

There are large numbers of people shopping online in China nowadays. As a result many more people are using online payment services. Of course services like PayPal have been around for years, but its expansion into the Chinese market has been limited.
In China it would seem that the online payment service offered by the Alibaba group, Alipay, has cornered the market. I say it would seem that way because there is a new player on the market: Tenpay.
Just how much of a rival is Tenpay to Alipay? And where does PayPal fit into the Chinese market? Lets start by looking at PayPal and what they offer. Just why has the company struggled to gain a foothold in China?

Click here for an updated guide to Online Payments in China (2019).


PayPal in China

In August 2012 it looked like PayPal’s move into China was dead. Their partnership with Chinese wholesale firm DHgate was cancelled seeming to close the door on the Chinese market. Fast-forward to June 2013 and it seems that PayPal’s parent company, eBay, is leading the charge into China. Obviously the company does not want to give up on having a presence in China, but it seems they may have missed the boat.
PayPal is battling for a space dominated by the massive Chinese e-commerce firm Alibaba group. PayPal currently handles cross-border sales between Chinese merchants and foreign consumers, but is not in the more lucrative business of handling transactions between buyers and sellers within China. This area is controlled by Alibaba’s Alipay.


Alipay has been called the PayPal of the East, but I think that it is more than this. First it is important to understand how Chinese consumers use Alipay before making a comparison with PayPal.
In my experience most people who use PayPal to shop online use their credit card through the PayPal portal because of the security that PayPal provides. That’s certainly the way I do it, if I use PayPal at all. I have my bank account details attached to my PayPal account, but I prefer to use my credit card. Chinese consumers are the opposite.
There are 564 million Internet users in China, which is only 42 percent of the population compared to 78 percent in America. 82 Percent of those Internet users own at least one credit card, but don’t use western brands such as Visa and MasterCard to shop online, but instead they use UnionPay.
Even though credit card use is on the rise in China most Chinese people are big savers and prefer not to use credit. It’s partly a cultural phenomenon where spending money you don’t have is anathema compared to saving and buying something when you can afford it. It’s the opposite of recent Western trends in shopping if you like.
An alternative to using a credit card is Alipay. It can be linked to a bank account, much as PayPal can be. A straw poll in my office revealed that all my Chinese colleagues use Alipay because it is more than just a way to shop online. It has many uses that include:

  • Transfer money to other bank accounts with payment made within two hours
  • Transfer money to other Alipay accounts
  • Pay credit card bills with no fee levied
  • Pay utility bills with no extra fee levied
  • Top up mobile phone with credit
  • Buy bus tickets
  • Check bank balance
  • Use at online check-out on many websites (lots of websites it’s the only way to pay)
  • Use to check-out on shopping apps and (these are escrow services)
  • Use to pay for products in-store (although this is not so popular yet)

All of the above are free for transactions within China. The services are secure and trusted by Chinese shoppers hence the desire to use this service when they shop on foreign websites, which they are starting to do much more.
In fact Alipay is starting to move into the US market for this very reason. The company wants to make the service a viable way for customers to pay for products at checkout. But the reason for this expansion into foreign markets is not just about competing with PayPal. Alipay has a competitor at home who already has a presence in many foreign countries due to its strong social media showing.


Tencent Holding is the company behind the social media apps WeChat and QQ. If we are making comparisons, WeChat is a Chinese version of Facebook (which as we all know is blocked in China circumvented of course by using a VPN) for your mobile phone. There is an English language version which works anywhere in the world.
I have friends in America who discovered the app while living in China and have moved back home, but we still keep in contact via the app. We can both see each other’s pictures added to our news feeds and send instant messages as well as group chat. I even used the app while I was in England to keep up to date with friends in China and friends in Hong Kong also use it.
Tencent have moved into online payment services with the launch of their Tenpay service in 2013, a direct rival to Alipay which the company says has 550 million users compared to Tenpay’s 200 million plus. The fear for Alibaba is that because of QQ’s wide reach in China and WeChat’s presence abroad, users will use Tenpay as they have access to it. It has sparked a fierce battle amongst the two Internet giants in China.
Amongst my colleagues Alipay is the clear winner. It seems that for vendors and merchants who use Taobao and Tmall, Alipay is the payment service of choice too. Alibaba, having prevented vendors from advertising on WeChat, is trying to get a foothold in the social media landscape by producing its own apps to fill this gap.
Whether it works remains to be seen as Tencent wields the power in terms of social media. Users are engaged with WeChat and QQ and getting them to move to new platforms just because they cannot access Taobao and Tmall through these apps seems a little far fetched.
The strength for Tenpay is the mobile gaming market. Tenpay is mostly used to buy games on social media platforms or to add money to gaming accounts. At this moment in time Tencent don’t pose a big threat to Alibaba.
I would say that Alibaba’s real motive in its move into social media is fitting into the tablet/mobile arena. Mobile is the future and a presence in that space is essential.

Alipay versus PayPal

On the surface Alipay and PayPal’s online payment services would seem to be relatively similar. But I believe there are some significant differences. I would say that Alipay provides a more integrated service than PayPal even if PayPal has a bigger presence internationally.
The fact that Alipay can be used for everything at the press of a finger is significant. People use it to transfer money, pay their bills, check their bank balance and add money to their phone account. They then go shopping online and can pay for their products all through the same app.
Ostensibly PayPal can do all of this and very securely (too securely sometimes?). But do people use PayPal for this? It seems to me that PayPal is used more as an escrow service on sites such as eBay. When shopping online I think someone in England, America or Canada is more likely to use their credit card rather than use their PayPal account linked to their bank as people do in China.
PayPal is experimenting with its mobile payment solution Beacon, but there are too many issues for me. PayPal president David Marcus claims that PayPal will be used as a wallet with people paying through their phone, but I’m not so sure this will happen in the very near future. Right now PayPal does not feel as integrated as it should be yet for that type of transaction.
This type of service would be more successful in China because Alipay is essentially a wallet app. The problems with poor quality 3G coverage prevent this from happening at the moment so a service that does not require wifi, GPS or a wireless network signal would work extremely well in my opinion.

Do you agree with me? Do you use PayPal and if so what for? Please leave some comments or ask me any questions that you may have.

Misha Maruma


Great article! Lots of information, very insightful. I like the personal touch.

Thanks Arnoud. Do you use these types of services yourself?

I think WeChat is more similar to WhatsApp and TalkBox, while Renren ( Kaixin ( are the Chinese version of Facebook.

That's what I thought too. But I guess WeChat does have a social feed, and that's a key feature of Facebook. So I could see how WeChat could be compared to Facebook too.

Thanks for the comments Brenda. I don't use Renren or Kaixin, but because Facebook is blocked in China I guess there is a big gap in the market for that type of social media.

The difference with WhatsApp is that you need a telephone number to have an account. It does not work on a tablet whereas WeChat does, giving it a wider use. But thanks for clarifying exactly what the Chinese version of Facebook is.

I've not used TalkBox. Does it have similar features to WeChat? For example a newsfeed?

TalkBox doesn't have features like the newsfeed.....

Quite detailed article, love it a lot. But two points, I do not agree. 1, Wechat in China is not similar to Facebook, and might be even more similar to Facebook. 2, Chinese people's attitude towards using credit card. Young people in China would use credit card often, while the middle aged or the old of course, just like the writer says, would not trust credit card.

lillian, let's face the thruth... ren ren WAS the chinese version of FB. Nut nowadays wechat is totally taking over what fb was built for and integrating the new interactions that people in 2014 is expectig from a social network.

It's totally fair to consider wechat the new FB.

Francesca, I would have to agree with you. I have written about this recently on the blog, but for me WeChat is THE social network for the time right now. It's mobile, it's e-commerce, it's fun. It has everything.
Are you based in China?

Great info of these 2 major payment gateway.
I am a royal Alipay user for years and I like their services, but lately I realized that they try to push their Apps, such as for free transaction or so, but one thing is let me down quite a bit is that when transferring a payment if the internet connection is bad, your payment either not send or they took the money from your bank card but failed to submit to the next bank and the system will send the money back, which is hassle sometimes.

Great story Misha. Can you follow up with one on the economics of the payment alternatives for users and retailers please? In North America there is a lot of anger from retailers at the major credit card firms who charge from 1.5-4% of every transaction to retailers, and ban retailers who try to offer cash discounts.

If the economies of scale of Chinese providers can be used to earn trust of global users and benefit retailers they could move around the world quite quickly. Why would they care about these slower growing markets? It could diversify revenue and facilitate more trade with fewer intermediaries.

Hi Sheldon, thanks for the comments. I'll look into doing a follow up for you. What payment alternatives were you thinking? I know Alipay charge fees for cross-border transactions, but not for transactions within mainland China.

Do you use Twitter or Google+? If you leave your details I can let you know when the follow up is ready.

As I mentioned at the end of this blog I think mobile wallets would be successful in China. I've written about this and it will be posted soon.

Not only in china but also in whole world the online shopping services are more in this way the new technology is being more used,seeing the features there about alipay i think this is the best online payments service.thanks for bringing this information to us.

Thanks for the comment. I agree with you that new technology is being used more for shopping online. What online payment service do you use or promote?

Alipay was initially introduce to solve the problem of vendor/purchaser providing fraudulent goods/purchases on taobao (equivalent to ebay without the bidding). When a buyer make a purchase on taobao, he/she pays first from your bank or alipay cash holding account, but money is not directly transfered to the seller, rather it's holding at alipay's escrow account.

The seller will send you the goods, if you are satisfied, you release the payment by confirming the shipment, if you are not satisfied, you request a refund or exchange, in cases that the seller refuses to respond, you can get alipay involved to resolve the dispute. Sellers acting on their own interests, typically don't want to get to the last part, because they will not get their money (held at alipay escrow) and also bad reputation when the buyer leave a nasty comment. Escrow account also provide protection for the seller, if a buyer made a purchase using credit card, and later on dispute the charges with credit card company, credit card company typically provide the refund (because credit card company has insurance to cover it), and charge back to the seller. So seller is out of the goods and without the money. By having escrow account in between, a buyer can't get his/her money back without going through the refund/exchange process which weed out some bad purchasers. Shipment info is used to track auto payment in case the buyers are lazy, e.g. if buyer don't confirm shipment after he/she received it, payment will be released 10 days after shipment arrived. All these changes provide a trusted platform for sellers and buyers to work with, and that's why taobao is growing so fast.

Now why other added features are added on alipay, as a business alipay is an independent payment system not just for taobao, and its business strategy has been to expand to being the center of all money transactions. Itself is more like a bank now, it expand its payment system link to other vendors besides taobao. It also added a money market fund feature last year, so your excess deposits can earn a higher interest rate than bank's savings rate. So how do alipay make money, simply on the interest of money held at escrow account, the 10-15 day interest on money held at escrow account is paid to non other than alipay, the buyer or seller don't get to receive anything. Alipay already has a unit to expand to lending to small vendors, because it can mine vast amount of transaction data to figure out who can be a good borrower. I see in the future, they will be able to lend out money held at escrow account and earn even higher interest rate. Now that's a win win for alipay and its customers.

Thanks for the comment. That's a really detailed description of how Alipay operates. It seems that Alipay is and will be the dominant online payment service in China for the foreseeable future.

Great article, Misha!

Even though both PayPal and Alipay serve the same purpose and work in a similar way, it's unlikely that they are going to compete against each other any time soon. I don't believe that PayPal would be ever allowed to operate in China as equivalent to Alipay. Paypal would certainly face too many regulatory challenges and legal obstacles.

I think that one of the principal issues with Paypal in China would be the fact it has high degree of anonymity, all you need to have an account is a credit card issued by any bank anywhere in the world . On the other hand, Alipay account is tied to the owner's identity and requires registering with ID.

Thanks Val. It's true what you say about setting up an Alipay account. I have done this on my computer using a passport, but doing this on my mobile is proving a little more difficult (partly because I forgot to change region and therefore need to put in a Chinese ID which I obviously don't have).

I want to use the taxi services such as Didi Dache and Kuaidi Dache, but it's proving rather difficult for me to do this. If anyone has any tips for me please leave a comment and let me know how I can resolve this situation.

im a new shopper from mexico in the china market this article help understand more you have a new reader...... this type of articles help me make understand more the cultural difrence i did not understand why almost all the sellers would not use paypal since is all i knew existed for payng (safe) but after i started to investigate a little i found that there was alypay at first i was not sure . I have 1 month that i discovered chinese marcket in my country i thought i had to buy many things to be able to get products and i was scared bacouse of the Customs duties had to pay i thought it would be to expensive.

Thanks for the comment Ana Maria. Tell me, do you use Alipay?

can any one open alipay account .. i dont have chinese bank account

Yes Rafay, anyone can open an Alipay account. You don't need a Chinese bank card. Alipay lets you register a visa or mastercard.

thanks .. i open an account but is it safe to use online phone verication sms alert .. as it didnt show my country in list .. how secure is it to attach credit card.. are there limits for shopping???

What country do you live in Rafay? 
Alipay is known for being pretty safe. I've not heard of any major problems in the news or from friends who use the service.
What do you mean by limits for shopping?

i live in pakistan... i have used unknown phone no for verification.. thats what i m talking security issue..
limit mean? how much dollar is limit for shoping one time

I'm not sure if there is a limit for shopping. I've never had a problem. Let me know if you can use your Alipay account and if you have any problems.

Outside of China you may sign up for alipay as an individual but it does not seem very useful as it says:
Dear Customer, we regret to inform you that due to business adjustments, the Alipay balance service has been terminated from January 1, 2017 (PDT).

For businesses it seems to be more relevant

well for the moment i registered but i have not strarted too used it yet ... but i will .. start soon.. for now i been using my bank card.

Hi Ana Maria
I too have a registered account, but don't use it that often. I think it depends how often you shop on Taobao or Tmall.
I can't register my card on my mobile Alipay app as you need a Chinese ID number to do this and obviously I don't have one.

all i been using is aly since i cant figura out how to boy taobao or tmall since is all in chinese i tray to type things in inglish how do you buy in this pages do you use yoybuy ? i would like some info on that cuz i have not figure out how to do that just yet :/ I dont understan yoybuy cuz i put the lik of the page i dont know on what price are the talking about is it dollars yanez or what is it or pesos.Hope one of you can help me figure it out thanks alot my friends

I can read Chinese so this certainly makes using Taobao and Tmall easier. Google Chrome has a decent translator built into the browser. It's not perfect, but it may help you to move around the website easier.
What is yoybuy? I'm not familiar with this.

well yoybuy is page where people buy for you since we cant buy directly from tmall taobao cuz you need an chinese acounnt to shop .... they buy and send it to you home but they change you . for shoping for you... since people are more familiar with paypal and the acept paypal . i wish i could buy my self but i cant ;(
will tray to active my alipay to see if their is a way i can shop using the translator.. wish me look cuz i been reading and is says you need to buy in you conuntries money i work in pesos in my card so im open for any help anyone might bring me here.... XD

Thanks for the information Ana Maria. Good luck with using Alipay. Let me know if you are able to use your account to buy things from Tmall and Taobao.

Useful insights. Nice the question about how e-commerce is becoming the big game changer... ;)

 Thanks Francesca. I'm glad you found the information useful.

international buyer can open alipay account ?? if they dont have chinese bank account .. its visa card season .. as ali express allow visa card use directly world wide ..

 An international buyer can open an Alipay account Rafay. You can register a visa or mastercard.
Do you have an Alipay account?

Can I transfer funds from paypal into alipay?

Hi there
I don't believe you can transfer funds from PayPal to Alipay or vice versa. Alipay is mainly used as an erscrow account for online shopping. You can also transfer funds from a Chinese bank account to Alipay and vice versa too.
I hope this answers your question.

Great article Misha! My question in regards to these online payment systems comes from another perspective. If I have paid accounts on my website, without purchasing any products, which one do you recommend? Considering that it will be a website with worldwide users. Which one is more secure for my users and myself as well? You said Alipay allows payments via Visa or Mastercard, but still, is more trusted in China than other countries. I've also read about Dwolla being a secure online payment system, but I didn't fully understand how it works....I'm also interested in how much they charge/ transaction. Of course there is also a tax to be paid for implementing the system. I'm struggling with this at the moment because I really can't make up my mind and choose the one that best suits my needs. Maybe you or other readers could help me with some ideas...:)

Hi Simona
Thanks for the comment. I've written an up-to-date blog post about this subject:
The latest blog is specifically for payment options in China. Can I ask, do you want to use this service for Western or Chinese customers? If Chinese I'd recommed Alipay. If Western I'd recommend having both payment options on your website. What I'd say about Alipay is that it's becoming more well known especially after the Alibaba IPO. This will only increase the trust and presence of Alipay as a third party payment platform.
If you'd like more information specifically about charges and transaction costs then I suggest you contact us directly at [email protected]. One of the team will be able to help you in much more detail.

Hi! some month ago I opened my alipay account, I registered with my foreign Passport number, charged it with my chinese debit card and used it on taobao!

Now I want to refill the credit because I only have about 50 rmb and ...they want my chinese ID number! is that possible???? of course I do not have it .I registered with a foreign one !!!

When I changed my password cause lost it I had to log in in a page and used my passport number so it means that they have it filed .So why now they ask me a chiense ID ? can't really understand.....

Do you have any idea about it ?


Hi Stefy
Is the problem now that you can't login to the account? Or you can't add money to the account? Instead of charging the account with money you can add your card details. When you go to purchase something from Taobao the money is taken straight from the card rather than from the Alipay account. This is how I use Alipay and I don't have any problems this way.
Please let me know how the problem progresses and hopefully you get it sorted out.


Can t add money! Fist time I top it with 500 kuai just to give it a try. Now I only have few kuai left and want to add more .

Can I pay directly with my debit card on Taobao? I always saw they ask for Paypal and Alipay . Teach me please!!!
thanks a lot


Hi Stefy
What I mean is you don't have to take money from your card and add it to Alipay. You can add your card details to Alipay and when you checkout on Taobao pay using Alipay. But the money is taken directly from the card via Alipay rather than having to add money to the Alipay account. I hope this makes sense.
If you have any other questions please send me an email at [email protected].


But can t find where to add my card detail.I am not skilled enough with chinese .
Will ask somebody to help me out. Maybe we can also solve the ID problem. Guess that it s safer to only have a small amount of money rather than all my money ! sometimes I used my debit card to top up my mobile credit and buy Southern Airlines ticket and I have to say that until now I never had any problem.

thanks a lot



Good luck Stefy, I hope you get your account sorted out.

Very nicely-written, Misha.

I have been comparing Alipay and Paypal to see which is best for taking payments within China, and I'm very much leaning towards a combination Alipay and internet banking.

Do companies use Alipay accounts to take payments, and if so do they use a corporate account? What tends to be the done thing in China?

Thanks so much for your help on this!

Hi Lisa
Companies in China do use Alipay to take payments. This is because of its massive usage amongst netizens. Alipay provides payment solutions to merchants in a wide range of industries including online retail, virtual gaming, digital communications, commercial services, air ticketing and utilities. It also offers an online payment solution to help merchants worldwide sell directly to consumers in China and supports transactions in 14 major foreign currencies.
The corporate account is called Enterprise Alipay and is a business-oriented and professional financial management and capital settlement service platform. If you  want to enter the Chinese market then the Enterprise Alipay service is a good partner as an escrow payment service.
If you send me an email I or a colleague will be able to give you some more detailed information: [email protected]

Hi Misha,

i hear and read about this Alipay service and i will like to have access to this one.I have to mention that i live in Macau and i do Trading Consultation and services online and my basic customers are from USA,Canada and some from Europa. My question is how to use Alipay to aloud my clients to make their payments to my Alipay escrow card or account!? can be this possible if all my clients are from the region mention earlier???
Please i also need to know how to proceed and what are the documents and procedure request from Alipay to open for me this service. I will real appreciate your guidance and advice.

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