Has fintech giant Ant Financial lost its credibility?

Jack Ma’s e-commerce conglomerate, Alibaba, counts among the most valuable tech companies on the planet. Yet, he has another valuable and expanding asset—Ant Financial, Alibaba’s fintech spinoff that has an estimated valuation of USD 74.5 billion.

Ant Financial is best known for its online payment platform Alipay, which tops China’s mobile payments with 54.5% market share. It also owns Zhima (Sesame) Credit, a credit-scoring system for individual users based on their payment behavior history.

There is little doubt that Ant Financial’s Alipay, together with Tencent’s WeChat Pay, has enormously transformed the payment scene in China. However, Alipay as of late suffers from trust issues and is facing backlash from customers worried about their privacy and financial security.

Zhima Credit campaign disputes

At the beginning of 2018, Alipay rolled out its annual marketing campaign, which allows users to generate a vivid consumption conclusion based on their shopping behaviors of the past year. The campaign saw a huge number of participants who were eager to post their consumption results on social media, until one lawyer warned that the service provider was infringing on its consumers’ legal rights.

Buried at the front page of consumption results was a tiny Zhima Credit user agreement clause, which was checked by default. If users continued to browse their annual consumption results by clicking the open button, they became automatically signed up to Zhima Credit if they weren’t already. And in doing so, these users inadvertently authorized Zhima Credit to collect their personal information from third parties to generate a credit score and allow Alipay to access it.

“According to the Consumer Rights Protection Law, consumers have the right to choose by themselves, rather than have merchants make choices for them,” Yue Shenshan the lawyer wrote on his own Weibo. “Business operators must warn their consumers about important agreements in a remarkable way.”

In the wake of the lawyer’s warning, Ant Financial received extensive criticism from media and users. As a result, Alipay unchecked the Zhima Credit agreement in the annual consumption results page. Zhima Credit then posted a formal statement on its Weibo account calling its behavior “idiotic.”

Screenshot from Zhima Credit’s statement on Weibo.

Its statement drew further denouncement for being rude and unapologetic. Days later, Cyberspace Administration of China, a top internet supervision body, summoned the executives of Ant Financial for its misbehavior. China’s Ministry of Industry and Information Technology also stated on a post on its website that Ant Financial and two other tech firms have “inadequate” policies relating to collecting users’ data and urged them to correct them.

Ant Financial vowed to overhaul its policy to prevent such accidents from happening again.

The whole incident mirrors how Ant Financial poorly handles user data and privacy across its business overall. It’s not so much about being carefulness as lacking an awareness of and respect for users’ rights and legally protecting their privacy.

In fact, this is not the first time Ant Financial has found itself the target of public backlash.

Bike-sharing deposit defaults

The year of 2017 has seen a burgeoning bike-sharing industry in China, and Ant Financial hasn’t remained on the sidelines. Not only has it invested in leading bike-sharing firm Ofo and smaller competitor Hellobike, it also has built a bike-sharing platform on its Alipay smartphone app. Through the app, users are able to unlock a wide range of shared bikes in urban China by simply scanning the QR code on each bike.

These bike-sharing services usually demand a deposit of around USD 45 before use, but Ant Financial did users a favor by striking a deal with various bike-sharing startups to wave deposits for those who meet certain Zhima Credit score criteria and who use Alipay to unlock bikes.

The above bike-sharing services remain available on Alipay’s app while bankrupt services Kuqi Bike and Bluegogo have been removed. Photo from Alipay

However, some bike-sharing startups that ended up bankrupt, including Kuqi Bike and Bluegogo, still required deposits on Alipay’s platform. Many users paid these deposits via Alipay but were ultimately unable to get their money back when the startups went bankrupt at the end of 2017.

China Consumer Association said it has received 210,000 complainants against Kuqi Bike over deposit defaults. In fact, the six bankrupt bike-sharing startups in 2017 collectively caused a consumers loss of over RMB 1 billion (USD 154 million) in deposits.   

Unable to obtain deposit refunds from the bankrupt bike-sharing startups, users contacted Alipay for refunding, yet Alipay refused to assume any responsibility for these deposit defaults, claiming it’s just a third-party payment platform.

These users argued that they had never downloaded the apps of these failed bike-sharing startups. They paid deposits and used shared bikes services entirely through the Alipay platform. A lawyer in China’s northwestern Xi’an threatened to file a class-action against Kuqi Baike and Alipay in last November, results from which have yet to come.

“I didn’t even know of Bluegogo until Alipay recommended using it,” said one desperate user named Lu Dan, 28 years old. “I would definitely not pay a deposit if it were not for my trust in Alipay. It has lost my trust after failing to return my deposit.”

Alipay maintains that it is a third-party payment service provider. But in the case of bike-sharing, it’s more than that. It provided a conspicuous entrance on its app and served as a platform for those bike-sharing startups to connect with customers. It has undeniably benefited from huge traffic and countless transactions from the users who use Alipay to access shared bikes.

Yet, when these bike-sharing startups failed, Alipay didn’t extend help to consumers hoping to get their deposits back. Shouldn’t Alipay be responsible given that customers paid deposits and accessed shared bikes directly through its platform?

(Top photo from p2p110.com)

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