ALIBABA & EBAY

THE IMPLEMENTATION OF THE ONLINE PAYMENT

METHODS OF ALIPAY AND PAYPAL

Moises Hernandez
Giulianna Soriano
Mara del Mar Vsquez

Final Project
Introduction to E-Business
LaSalle College
November 2016

TABLE OF CONTENTS
INTRODUCTION..............................................................................3
ALIBABA & EBAY.............................................................................4
DESCRIPTION IF THE ONLINE PAYMENT PLATFORMS IMPLEMENTED BY THE
BUSINESSES.................................................................................... 6
ALIPAY................................................................................................6
PAYPAL...............................................................................................7

FINANCIAL, TECHNICAL AND CULTURAL CHALLENGES INVOLVING THE

IMPLEMENTATION OF THE TECHNOLOGIES...........................................8
WHAT HAPPENED AFTER THE IMPLEMENTATION OF THE TECHNOLOGIES? 10
BIBLIOGRAPHY.............................................................................13

INTRODUCTION

In this project were going to analyze the difference between the payment technologies implemented by
two of the leading E-Commerce marketplace platforms in the world, Alibaba and eBay. The two of them have made
big technological changes, implementing new payment methods that have changed their companies and the market.
Alibaba implemented Alipay in 2004 and eBay, PayPal in 2000, when it bought the company. The competition
between the companies has been persistent over the years because of their similarities, and the control each of them
has had in the E-Market in different countries. Well compare both companies, in what each of them is and in what
they consist of, describing the technologies each of them implemented, the challenges implementing the
technologies and how each of them influenced the businesses, and the market and what was their added value. So we
can conclude what happened because of the implementation of them.

ALIBABA & EBAY

Jack Ma, is one of the biggest, most successful and influential entrepreneurs of this time. He and his
businesses were born in China. Jack Ma has being able to expand Alibaba throughout the world and getting it to be
one of the leading E-Commerce companies in the world.

Since Jack Ma was young, he has had the spirit of an entrepreneur, creating new ways of market
connectivity, thinking in all the problems and necessities of the Chinese market and its relations with other countries.

After his first trip to the United States as a translator, he discovered the full potential of the internet. He
bought a computer before leaving to China, with the help of some US programmers he started a page that was meant
to make connections between businesses easier by creating an online business connection platform. The major
problem at the time was that computers in China were scarce, and people didnt believe in what the internet could do
or didnt even know about it. So Jack Mas efforts to start an online business connection platform didnt go as
planned. However, it made him start working with the government, where he made a lot of connections with people
that helped consolidate his vision, like the creator of Yahoo, Jerry Yang. This made him create a team of 18 people,
including him and his wife, and launch Alibaba in 1999. Still with the dream and objective of using the internet to
facilitate business activities, the goal of Alibaba was of facilitating international trade for small and medium
ventures based in China (Jalloh, s.f.).

Alibaba was slowly growing in China, but it had no revenues, just losses for several years. After a long
time, they finally got an investment of $25 millions dollars from the Softbank (20m) and Goldman Sachs (5m),
which helped the business stay afloat. In 2003 Jack Ma and his partners saw the huge entry of eBay to China as a
major threat to their company, and decided to create Taobao.com.

Taobao is a C2C platform, where anyone can sell or buy products from one another. Taobao is totally free,
what makes it unique from other companies. No fees are charged for the use of the platform to neither the seller or
the buyer. However, this isnt a profitable business either, which made people start calling Jack Ma, Crazy Ma.
But they didnt know what was going to happen between the future huge pair of C2C companies in China, Taobao
and eBay.

Before all this happened, in 1995 Pierre Omidyar, an Iranian-American economist born in Paris, created

AuctionWeb. After graduating from computer science in 1988, he started working in Claris a subsidiary of Apple,
and helped develop the software company, Inc. Development Corp. One year before Microsoft buys this small
company, Omidyar decides to develop his own idea and creates a really simple auction website called AuctionWeb.
The idea of the C2C business site was for people to be able to sell and buy things from one another. People could
also start bidding for the price they were willing to pay for the product till the final sell.

In one year the company has started to become more and more popular and grow in an exponential way,
having a total of $7.2 million dollars from sales of goods. A year later, Omidyar introduced the feedback section
where the customers could leave their comments of the seller after they made a purchase. This started to create
security and confidence for buyers and increasing the revenues, by 1998 sales reached 710 million dollars.

At this point the company was already called eBay, and had his IPO that year, beating expectations and
getting to $53.50 in one day. This helped the expansion of the company to more countries every year or even every
month. At the same time, eBay starts to implement more options to improve the website; as the buy it now option,
and then introducing a whole new and secure method of payment in 2002, when they bought PayPal, enabling the
growth and improvement of the two, making eBay one of the worldwide fastest growing companies the next year.

Thanks to the incredibly fast growth of eBay, it entered with all its strength into the Chinese market. What
eBay wasnt thinking about was in the chinese growing company Alibaba. While eBay was starting to gain
customers in China, Taobao was launched, creating the competition between the two.

eBay started trying to gain more market, making an investment in eBay China of $100 million dollars, and
then invested $30 million in EachNet, an already existing Chinese marketplace, to acquire 33% of the company and
gain more power in the country. Meanwhile, Taobao was starting to grow really fast, without having any revenue,
but it made exactly what the Chinese market wanted. The people didnt want to pay money to sell things on eBay, so
they started to use its rivals. This made the users and sales in Taobao skyrocket. At this point the only thing left to do
was give clients the security that no one else was offering in the market; avoid the snatching of money and having a
return policy for the sale of a bad product. In addition, Alibaba implemented Alipay, their own online payment
platform where users pay, but the money isnt deposited in the seller's account until the client receives the product
and agrees to pay for it.

eBay tried competing too, charging less fees to the sellers just if they wanted to promote the site, but people
had chosen already, and they chose Alibaba. After sometime, seeing that Taobao had win the fight in China, eBay
changed its focus into other countries. Alibaba kept growing and founding other online market websites like Tmall
Platform (Chinas largest third-party platform for brands and retailers), Juhuasan (Chinas most popular group
buying marketplace by its monthly active users just for China), 1688.com (China wholesale marketplace), and

AliExpress (Global consumer marketplace internationally). eBay kept also growing, founding different companies
depending on the country, like Kijiji in Canada, Gumtree in some European countries, others like StubHub (worlds
largest marketplace for online tickets), and the international eBay Classified Group (that helps people find what
they're looking for in their local communities).

Alibabas strength in the market is in China, having 78% of their revenues from the country, in comparison
to eBay, that has its big market is United States, which provides approx. 40% of its revenue, leaving the other 60%
of revenues to the rest of the countries they operate on.

These two companies are ones of the leading E-Commerce platforms right now, the two have similar ways
of working and have introduced similar payment methods that have changed the companies and how people buy.
However, the two have different markets and evolutions. Well have to wait to see where their growth takes the ECommerce market and the companies themselves

DESCRIPTION IF THE ONLINE PAYMENT PLATFORMS

IMPLEMENTED BY THE BUSINESSES

ALIPAY

Alipay is an online payment platform with no transaction fees, which works like an escrow service that
reduces transaction risk for online consumers, it was launched in China on 2004 by Alibaba Group with the purpose
to see Taobao grow as a popular online payment platform such as Paypal.

Alipay is the most used online payment service provided in China, with over 100 million daily transactions
and over 400 million active users. (Ayden, s.f.)

Alipay operates with more than 65 financial institutions including Visa and MasterCard. Internationally,
more than 300 worldwide merchants use Alipay to sell directly to consumers in China. At the end of the last year,
Alibaba was worth around $70 billion. (Booton Jennifer, 2016 Dec 2)

This online payment allows Chinese citizens to make secure purchases from international markets safely
and securely from the comfort of their computers and from their mobile devices.

Using Alipay while shopping, you will protect your personal data and simplify the procedure of payment.
Now people can do all their payments using this online platform.

PAYPAL

PayPal is an online payment platform that facilitates the exchange of money between eBay traders.
It is one of the world's largest Internet payment companies, which was founded by Peter Thiel and Max Levchin in
1998, and became owned by eBay in 2002, paying $1.5 million for PayPal.

Many analytics says that PayPal is worth around $40 billion of eBay's total market capitalization of $70
billion. (Steven Bertoni, 2016 Feb 18)

PayPal offers a secure service through which funds can be transferred from one PayPal account to another.
It attempts to make online purchases safer by providing a form of payment that does not require the customer to
disclose credit card or bank account numbers and it transfers the money from the buyers PayPal account to yours,
its as quick as sending an email. When Visa or MasterCard are used in a payment of a product, personal information
is protected.

For the buyer, there is no fee included, because PayPal attaches the buyers account to their debit/credit card
or bank account during purchases. However, on the receiving end, the seller is charged with a merchant fee if the
buyer pays for the product with a credit card.

As an online payment processor, PayPal is operating in an increasingly competitive marketplace, going head
to head with such corporate giants as Google, Amazon and Apple. (J.B.Maverick, 2015 July 16)

Users are allowed to buy and sell products and services with businesses that are on the PayPal networks.
PayPal can be accessed through its app, webpage and through other websites that have the option to pay by PayPal.

FINANCIAL, TECHNICAL AND CULTURAL CHALLENGES INVOLVING THE

IMPLEMENTATION OF THE TECHNOLOGIES
During the implementation of new technologies, companies whether is the seller or the buyer, always face
challenges or conflicts. When eBay implemented the PayPal technology it was because the company of PayPal was
facing issues and was forced to become part of the rising success of eBay. The real reasons why PayPal was sold to
eBay was because of 4 essential reasons; eBay risk, Visa and Mastercard risk, legal risk, and finally the
psychological factors.

The eBay risk; eBay back in 2000 before buying PayPal, they possessed of the payment volume at the
time. eBay was a rising company who was growing at an exponential rate making its payment volume to grow every
month, week, and day. PayPal without eBay couldnt stay afloat, it would have taken years for PayPal to overcome
the lost payment volumes theyve had. Most of the online payment platforms such as PayPal, have razor-thin
margins and large fixed costs so, in order to make the model work it needs huge volumes of payments. Without
eBay, PayPal wouldnt have survived.

The Visa and Mastercard risk; the card associations were seeing Paypal as future rivals as they were
starting to operate in the same business grounds. Paypal having the pressure of losing the payment volumes of eBay,
and the pressure of their rivals Visa and Mastercard who were teaming up with eBay through their relationships
from Wells Fargo to impose supposed infractions to PayPal, was building up. A subtle way for the card associations
to slowly crush PayPal was to categorize PayPals payment as quasi-cash, which has huge fees associated with it.
The quasi-cash is an option of currency Paypal offer its users in order to make transactions. Till this day, users
usually never check the box or exchange their money for the quasi-cash currency. It was an ideal outcome for
Paypal to never be categorized as quasi-cash.

The legal risks; PayPal had started to use its payment options for online gambling. Although it was
perfectly legal at the time a number of state attorneys general including Eliot Spitzer, were looking to make a name
for themselves by investigating whether PayPal was aiding and abetting online gambling (Forbes, 2014). In the
eBay acquisition, PayPal announced that they were prohibiting this transactions. PayPal being a stand alone
company would have being an easy target for politically-minded prosecutions at the time. A great example is that in
the State of Louisiana, previously shut down PayPal for a week due to the arbitrary decision of some bureaucrat.
This was reversed, but the legal issues seemed never ending (Forbes, 2014).

Finally the psychological factors; through all the problems mentioned above, the PayPal team was
exhausted of this constant fight. They had achieved to win the fight for 12 months, but after the 12 the team had to
gather all around and discuss the possible sale to eBay. They analyzed the markets, their political and card
association rivals, and especially the constant war with eBay. Just because someone shoots five bullets at you and
misses does not preclude the sixth one from killing you (Forbes, 2014). The team was not confident that they
could succeed forever or that the government would intervene. The sale to eBay was imminent.

Alibaba introduced their new technological advancement in 2004. It was a new online payment platform
called Alipay. During and after the implementations of Alipay, Alibaba face several challenges. One of the
challenges was to be able to make and feel secure the chinese people of using the online payment platform. The
chinese feared these types of platform because they had to put all of their personal information such as telephone
number, address, and more. Jack Ma was able to win the confidence of the people by giving value to its customers
and putting his business on the line through financial means in order to compete with PayPal. For us to launch a
payment system, there were financial and legal roadblocks, but if I didnt do it, then E-Commerce will go nowhere
- Jack Ma (Founders Guide, 2015). Alipay revolutionized E-Commerce in China. The Chinese people werent used
of using online payment platforms, but Jack Ma was able to fight against all regulations and fight against a big and
international online company such as eBay.

In order to use PayPal as an online payment platform, it involves a set of fees and regulations to the
customer. The creation of Jack Ma and his team, Alipay, were able to eliminate transaction fees, improve the
customer service, and satisfy the needs of the chinese people. Transactions were free of charge and the seller
wouldnt receive its payment unless the buyer was happy with the product.
In 2010, Alipay started experiencing problems with their privacy of information. A hacker stole 20
gigabytes of user information and sold them to other e-commerce firms and market research company (Quartz,
2014). It wasnt until 2012 that Alipay noticed that the information was stolen right out of their systems. A huge
online payment platform such as Alipay dosent find lucrative these sorts of informations leaking out to the public,
since they are planning on expanding their online services worldwide.

Through the implementation of a new technology in a company, it is always involved with challenges or
problems. In both cases whether it was PayPal or Alipay, both companies; eBay and Alibaba, faced several difficult
tasks or challenges in order to implement the idea. However, even with the implementation of new technologies the
market and the culture of the country has to be studied before investing. Through the implementation of PayPal,
eBay lost the war in China because of their lack of satisfying the needs of the chinese people.

WHAT HAPPENED AFTER THE IMPLEMENTATION OF THE TECHNOLOGIES?

BEFORE AND AFTER PAYPAL

PayPal was one of eBays first acquisitions, what changed the way of online payments for the company
and increased the number of clients by thousands.

At the beginning payments on eBay where really rudimentary and took a long time to be applied. Bob
Sanguedolce, former eBay executive, explains that before PayPal, most payments between buyers and sellers on
eBay were done by mailing checks or by other payment arrangements made directly between the buyer and seller
(Sanguedolce, 2015). Every payment took a long time because prior to the sell there were a lot of email exchanges
between the two parts to agree in the payment method, that normally was by check. So the seller had to wait for the
buyer to send the check to them, then go deposit the check at the bank, wait a few days for the check to clear, and
just then would the seller send the product to the buyer. That was a very long process that demotivated a lot of
people to buy through the page, thinking that it would take approx. 10 days (inside the US) just for the payment to
be effective.

This arduous process made eBay start to think in other ways of making sells more effective and immediate.
First they came out with the solution of buying a startup company called Billpoint and make a partnership with
Wells Fargo Bank, so they were able to launch the project as an integrated payment service for eBay. The only
problem was that this payment method wasnt as effective as PayPal, another small online payment platform that
had a lot of flaws but was growing way faster than all its competitors.

For the eBay executives, buying PayPal wasnt a hard decision to take, because this was one of the few
payment service companies that was growing with new clients every day.. People were loving the effectiveness of
the platform, this could just help and make eBay stronger and bigger.

So in October of 2002, eBay bought PayPal for $1.5 billion.(Wikipedia,s.f.) And phased out its competing service
Billpoint. This was a huge change for the two, that ended up complimenting each other by joining their forces. All
the problems PayPal had with client services and getting to new customers were solved by eBay. And for eBay,
PayPal was the perfect solution for online payments. Now people could pay automatically through the page without
having to send checks, deposit them, etc., So the wait time was cut to half and even less just having to wait for the
shipping. Peter Thiel says it best; PayPal, made buying and selling on eBay at least 10 times better. Instead of
mailing a check that would take 7 to 10 days to arrive, PayPal let buyers pay as soon as an auction ended. (Thiel,
2014)

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Through PayPal, people felt safe and did everything quicker, everyone loved the new eBay and the
improved PayPal. And the company started to increase sales and revenues of fees, thanks to the continuous customer
growth. It was the perfect and more strategic solution for a problem that was slowing the growth of eBay. It made
sales skyrocket and was a key point for the actual international size and power that the company has today.

ALIBABA BEFORE AND AFTER ALIPAY

Chinas consumer financial services were stock in a low-tech era for a really long time. Not even banks had
mobile services or ways for people to do things easier or faster. When you bought something online the only ways of
paying where by sending a check or depositing money directly into the seller's account. This made purchasing online
insecure and not very appealing for new possible customers.

Throughout

time, online payment platforms started to emerge in China, banks and other kinds of

businesses started to implement these platforms and to facilitate online options to make customers life easier. The
problem was that there were no rules protecting customers in China, so if you got the wrong product buying online
and the seller doesnt want to change it or give you your money back, no law protected you, and the buyer walked
out of the problem unharmed leaving you with a bad product and no money.

Heres where Alipay entered the market and changed everything for chinese people. After all this insecurity
they lived on when they did shops or transactions online, Jack Ma came up with the solution, an online payment
platform where customers could be 100% confident and secure about all money transactions and shops. Alipay
assures you that Your money is not released during the trade process until you have confirmed successful delivery
of the order. Once confirmed, Alibaba will release payment to the supplier. All of your information will be safely
encrypted(Alibaba, s.f.), it gives you a full refund; If the supplier doesn't ship your order on time, or if you don't
receive it and it is determined to be the fault of the supplier, you'll get your payment returned directly(Alibaba, s.f.),
and it gives you an option of partial refund and keeping the products if the product you received is significantly
different from the one the seller is actually promoting or is not in good quality, but you want to keep the product.

Alipay was the solution for what people needed the most in China, and it gave people the security to do any
money movements, purchases and payments that you need. For that, in China, it has become the most used way of
buying things from online shops like Taobao, movies or plane tickets, pay in a store, a restaurant or even merchants
on the street. You can pay your bills and send your rent payment money to the landlord, and so much more. Now
you can do this from your phone and never worry about receiving a bad product or making the wrong transaction.
Alipay changed how payments work and made it accessible for everyone, anywhere they are, and in the most secure
way. It revolutionized online payment and the way people people buy, sell, pay, move money and more.

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CONCLUSIONS

From this project we can conclude that the implementation of the technologies changed E-Commerce. The
technologies implemented where on the field of online payment platforms. This platforms were created in order to
give value to the customers. They create payment security, facilitate payments, sells and transactions.

Alipay revolutionized the online payment platform systems. It made transactions free of charge, created the security
chinese people need to use online payments. Alipay modernized societys payment habits, from buying things
online to making financial transactions.

Alipay improved the customer service regulation in online payment platforms, buyers have the security of being
able to confirm the quality of the product received before the payment is completed and money is transferred to the
sellers account. Customers also have the options of have a full refund for bad quality of the product or partial refund
and keeping the product.

eBays acquisition of PayPal back in 2002, was the starting point of fast and safe online transactions. It
complemented eBay making it the perfect medium between the seller and the buyer, giving the two parts the security
of transactions and of refunds. It connected people worldwide and it increased and accelerate the growth and
potential of ebay.

eBay improved PayPals infrastructure such as, its customer service and the attraction of new customers. Both
companies complement each other, provoking the exponential rise of eBay.

The implementation of the online payment platforms in both companies, Alibaba and eBay, increased sales and
customers exponentially. These technologies were crucial points for the growth and development of the companies
and to become two of the multinational leading E-Commerce platforms.

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2014. Web. 20 Nov. 2016.

Coloso, Katrina. "How Jack Ma Became One of the Richest Men in the World." Founder's Guide. N.p., 15 May

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