Alipay terminates POS service

Alipay.com, a third-party online payment platform under domestic e-commerce giant Alibaba Group, announced Tuesday on its Sina Weibo account that its offline point-of-sale (POS) payment service will be closed due to "some reasons known to everyone."

Alipay did not reveal more details but the announcement has triggered heated discussion online. Many media reports and netizens linked the announcement with pressure from ­China UnionPay, a Shanghai-based national bankcard association.

Zhang Daosheng, a public relations manager at Alipay, told the Global Times Tuesday that the company would not comment on the speculation.

The pressure from the UnionPay is the main reason for Alipay to give up its cash- on-delivery (COD) service for e-commerce, Wang Weidong, an industry analyst with iResearch, told the Global Times Tuesday.

UnionPay could not be reached for comment by press time.

According to Alipay's Sina Weibo post, Alipay launched its logistics POS strategy on March 19, 2012, including POS payment which enables COD for e-commerce transactions.

According to the ambitious plan, Alipay was to invest 500 million yuan ($81.7 million) to deliver POS equipment mainly in the first- and second-tier cities, and then promote POS to the third- and forth-tier cities.

Zhang said that the card issuing bank, payment receiving bank and UnionPay share the offline transaction service charge through UnionPay's network, which was also the case with Alipay's offline payment service.

As for why Alipay closed the offline payment service since it has cooperated with UnionPay, Zhang did not give a direct answer but said "it is not necessary to continue."

Even though Alipay co­operated with UnionPay at the beginning, it could have abandoned UnionPay and operated its offline payment service independently when it became mature and successful in the future, Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times Tuesday,

Therefore, it is not in the interest of UnionPay to have a partnership that threatens its offline transaction fee, which is its main source of income, Lu said.

UnionPay is trying to control the fast-growing third-party payment platforms, said Wang, "Most of the online third-party payment platforms pay transaction fee directly to banks, so UnionPay is sidelined. Now, it has started to muscle in and strengthen its position in the business, both online and offline."

Recently, UnionPay proposed a plan to its board to ­regulate non-financial institutions' UnionPay card transactions and protect bank members' interests, the Xinhua News Agency reported Tuesday.

On August 13, UnionPay held a conference attended by 52 third-party payment platforms that have cooperation with the Uniopay, and claimed that the transactions across different corporations must go through UnionPay, Xinhua reported. Zhang said Alipay did not attend the meeting.

Zhang also said Alipay's core business is online payment and it will make proper arrangements for the e-commerce vendors who cooperated with Alipay on offline POS payment service to ensure there is no negative effect on their business.