Founded in 2004 as an escrow payment platform meant to ensure that people buying from Alibaba’s e-commerce platforms didn’t have to deal with dodgy merchants who took their payments but never delivered the products, Alipay has now grown into an internet behemoth of its own. It all started in 2008 when Alipay launched a public utility payment service in Shanghai allowing users to not only make e-commerce purchases but also pay their water, electricity, coal, and phone bills. Now, 15 years after the payment service was founded, Simon Hu, CEO of Ant Financial, Alipay’s rebranded parent company, announced that Alipay plans to upgrade from merely a financial service platform to a digital life service platform within the next three years.
To be more precise, on March 10th, during the Alipay Partner Conference in Hangzhou, the company announced a comprehensive revamp that would potentially turn it into the world’s largest open platform for digital life. In the next three-years, Alipay expects to work with 50,000 Independent Software Vendors (ISVs) to assist 40 million service providers in their digitization efforts, increasing efficiency and reaching more customers by 2030, up from more than 1 million currently on the platform.
A spokesperson for Alipay commented on the new development plan, “China’s service industry contributed to 59.4 percent of GDP growth in 2019, according to the National Bureau of Statistics. Despite their importance to the economy, Chinese service providers generally still rely on traditional brick and mortar business models and have insufficiently applied digital technology to boost efficiency and improve customer experience.”
“Meanwhile, consumer demand for digitalized services has been expanding rapidly. In 2019 alone, the number of searches for lifestyle services within the Alipay app increased by 300% compared with 2018,” he added.
In fact, as pointed out by Chinese tech media powerhouse 36Kr, this change has been brewing for a long time. In July 2019, Alipay released a TV ad “Good Life, Alipay” which aired on China’s Central Television (CCTV), focusing on a series of Alipay’s daily life applications including garbage classification, Alipay Ant Forest (a mini-program that encourages users to lead a low-carbon lifestyle), quick vaccine checkup, utility payments, ETC services, electronic social security card, etc. Yet, the upcoming revamp is set to become the most important upgrade Alipay has made in its 15-year history.
It is also indicative of a wider trend that can be called “superapp-ization.” Simon Hu noted that China’s other superapp contenders – Meituan, Ele.me, Ctrip and Fliggy – accounted for no more than 5% of China’s service industry. A large share of the industry has yet to go online. “80% of China’s service industry has not been digitized,” he emphasized.
According to the China Internet Network Information Center, 99.1% of Chinese netizens went online using mobile devices in 2019, compared with just 24% in 2007. The proliferation of smartphones in China has paved the way for the domestic service sector to begin adopting digital technologies, thus becoming an important precursor of “superapp-ization.” WeChat and Alipay are arguably the two earliest pioneers of the model, creating accessible and convenient platforms for integrating various services and use cases.
While carrying a slew of inhouse features, these superapps also create an ecosystem for outside service providers and merchants, best exemplified by WeChat’s mini-programs. Instead of creating separate apps, merchants now have an opportunity to build upon an existing platform that also allows them to reach their customers where they spend most of their time.
The model is currently being copied worldwide with new superapps springing up the world over, with the most prominent examples being Singapore’s Grab and Indonesia’s Gojek. There are also numerous companies trying to readapt the superapp model in the West, including Uber and even Facebook, yet fears of monopolization are currently hampering their advances in the field.
According to the National Bureau of Statistics, China’s GDP in 2019 was 99.865 trillion yuan, and the added value of the tertiary industry equaling roughly 53.32 trillion yuan or 53.9%. This trend is obvious worldwide, with global technological development, the service industry is considerably growing in importance and its digitization is just a matter of time. The tricky part is ensuring that merchants and service providers have the right recourses and toolkits to make a step forward in their development. This is where superapps, as comprehensive service platforms, get to shine by providing assistance and guidance to brick and mortar businesses.
It is no coincidence that Alipay is taking decisive steps towards becoming the ultimate service platform. The COVID-19 epidemic that took China by storm became the main catalyst for Alipay’s change. During this period, China’s offline service industry took an unprecedented blow, while conversely, online services got an opportunity to display their strengths in e-commerce, new retail, online education, live streaming, etc., becoming indispensable for millions of Chinese stuck in a nationwide quarantine.
“In China, service providers have been leveraging Alipay’s mini-programs to reach the platform’s 900 million consumers base in the country amidst the outbreak. For example, Alipay launched a special section within its app for its users to access 48 contactless services provided by service providers, ranging from food delivery, paying utility bills and refunding plane and train tickets,” said an Alipay representative.
However, the spokesperson for the company also noted that even before the outbreak, there was a noticeable growth in demand and supply for digital lifestyle services.
“According to Alipay’s own statistics, in 2019 alone, the number of searches for more than 1,000 kinds of digital lifestyle services beyond the platform’s payment offer, went up 300%, including ordering food delivery, making a medical appointment, checking one’s housing fund, and booking a courier for delivery,” he clarified.
Despite the fact that it took a global pandemic to make the move into a more convenient and technologically advanced future, Alipay’s announcement makes a clear statement, notifying the world that it is time to transform. While the monopolization that is associated with the superapp format is a valid concern, the benefits that it can provide to millions of small and mid-size businesses struggling to make ends meet in the new digital world are sure to overshadow the flaws of the model.
In fact, the model itself is not monopolist, but usually only a rather large player will have sufficient recourses to claim “superapp” status. However, it is nothing new. Google and Facebook have been expanding their influence through an ecosystem of separate apps and services for years. Superapps, in this respect, are no different. They are, however, more convenient and thus, arguably, more likely to survive in the future.