A couple of years ago, one of the most commonly cited obstacles to e-commerce penetration in China was the lack of effective methods of payment, especially considering the very limited credit card use at that time. Trying to deal with these issues and in an effort to win consumer confidence, Taobao introduced its Alipay escrow accounts system whereby customer payments are held in escrow until shoppers receive their orders. By contrast, PayPal, Alipay’s Western counterpart, transfers the payment to the merchant automatically when the buyer places the order and merchants do not send out orders until payment is received. Alibaba created Alipay in 2004 to let millions of potential customers who lacked credit and debit cards shop on ...
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