Alibaba to launch virtual credit card service next week

Want China Times, Staff Reporter 2013-08-10

Alibaba's headquarters in Hangzhou. (Photo/CFP)

Chinese e-commerce giant Alibaba Group is scheduled to launch its virtual credit card service next week as part of its policy to promote online shopping, according to a source familiar with the matter.

The source said Alibaba's online payment service Alipay is looking to partner with banks to launch online credit lines of up to 5,000 yuan (US$800) for each customer, with an interest-free period of up to 38 days.

Online shoppers would not receive a physical credit card but an Alipay account, the source said.

On average, banks offer interest-free credit of 1,000 yuan (US$160) to 50,000 yuan (US$8,000) for a period of between 20 to 56 days.

The service will be available on mobile devices such as smartphones and tablets, and will be confined to Alibaba's Taobao and Tmall.com sites.

Alipay and the group's financial arm Alibaba Small and Micro Financial Services Group could not be immediately contacted to confirm the report, the Chinese-language Chongqing Evening News stated.

A guaranteed subsidiary set up by Alibaba in Chongqing will act as a guarantor for buyers. A commission of between 0.8%-1% will be charged by the vendor when an order is placed. An overdue payment will result in a 50% interest rate penalty charge.

The group will first send a text message to customers whose payments are overdue, followed by a voice message, with the final recourse being a personal visit from a debt collector.

If all these methods still result in no payments for more than a year, the group will cancel the customer's account.

Asked whether the penalty was too light, the source said a detailed plan to deal with such scenarios was still being mapped out and had not been finalized.