Alibaba Group Holding will expand the payment channels for its online shopping platform tabao.com by introducing Shanghai-based ChinaPay, the online payment subsidiary of China UnionPay, domestic news portal eeo.com.cn said Sunday.
The two companies are holding talks but details about the cooperation are yet to be disclosed, the report noted.
Alibaba declined to comment when reached by the Global Times on Sunday.
Authorities in China have moved to limit the growth of third-party payment companies in recent years, so Alibaba needs support from UnionPay, which has close connections with domestic banks, Li Chao, an industry analyst with Beijing-based market consultancy iResearch, told the Global Times on Sunday.
China UnionPay is the largest domestic bank card association.
The People's Bank of China (PBC), the central bank, released regulations for online payment services offered by non-bank institutions in December 2015.
The PBC wants to avoid a situation where large sums of money are being deposited in third-party payment accounts that are beyond the protection of bank deposit insurance, a situation that could leave consumers vulnerable to risks, the Xinhua News Agency said in December 2015.
However, even if ChinaPay is included in the payment options for taobao.com, it would play only a small role because most shoppers are already using Alipay, which is Alibaba's own online payment platform, according to experts.
When Alibaba Chairman Jack Ma Yun created China's largest e-commerce platform Taobao in 2003, he faced difficulties in introducing payment channels. In 2004, he set up Alipay, which is now China's largest online payment platform. The service has become a vital part of Alibaba's ecosystem.
Since the creation of Alipay, the country's third-party payment sector has been growing at a torrid pace.
Transactions via online third-party payments totaled about 12 trillion yuan ($1.8 trillion) in 2015, up 46.9 percent year-on-year, showed data released by iResearch in March.
Alipay topped the third-party payment industry in 2015, accounting for a 47.5 percent market share, followed by Tencent Holdings' payment arm Tenpay (20.0 percent) and UnionPay's ChinaUMS (10.9 percent), according to iResearch.
Alipay has a part of Taobao for many years, and other payment companies will find it hard to compete because of Alipay's improved operation procedures and good user experience, said Li.
"Given these factors, users are unlikely to change their payment tool from Alipay to ChinaPay," Li noted.
However, Li said, "Alibaba may need UnionPay to help it complete some offline payments."
In 2013, Alipay announced it was halting its offline point-of-sales service (POS) for small companies for "obvious reasons," media reports said at the time.
Market rumors said that UnionPay had put pressure on Alipay to route its POS service through UnionPay's system so it could increase its commission earnings on transactions, Reuters reported in August 2013.
