Consumer Protection as the 'Open Sesame' that Allows Alibaba to Crush the Forty Thieves (Gaining Market Power by Protecting Consumers: A Private Company Blows China's Banks Away)

Abstract

Following in the footsteps of the man whose name is associated with the Forty Thieves, and whose immortal words gave him access to the treasure, the twenty-first century’s Alibaba found his pot of gold in Chinese consumer with his 'Open Sesame': the protection that Alipay delivers to consumers. By offering an escrow service, Alipay accounts for approximately half of the online payment transactions in China, becoming the biggest threat to China’s banks in the state-backed financial industry. This article aims to discover how Alipay drives Alibaba’s growth by analysing current consumer protection issues in China, Alipay’s legal character and its consumer redress. It also examines why Chinese banks’ triple advantages, i.e., state support, public trust and monopoly status failed to help them secure their share in Chinese online market. China’s announcement of the final drafting of The Deposit Guarantee (Insurance) Scheme indicates that opening up the Chinese financial market completely is only a matter of time. How to win back the trust of consumers and compete with both domestic and foreign finance institutions are currently the biggest challenges facing the banks in China. Alibaba’s success demonstrates that harnessing consumer trust is the main source of its increasing market power.