With the arrival of Amazon in Australia, it is understandable for retailers, distributors, shopping center owners and logistics companies to be concerned. But when it comes to global e-commerce, they have to consider the financial power and growth potential of Alibaba Group and Tencent Holdings.
The Australian Financial Review said that both Alibaba and Tencent pose a greater threat than Amazon, as the two Chinese Internet giants are more likely to become the world's largest e-commerce providers.
A document released by Better than Cash Alliance--a partnership composed of 50 entities that include Bill & Melinda Gates Foundation, Citi, Visa, MasterCard, Omidyar Network, US Aid and the United Nations Capital Development Fund--provided an analysis of the two Chinese companies and their impact on world economy.
According to the alliance, countries can learn lessons about the rapid growth of digital payment ecosystems in China, which gave poor people access to micro-finance and helped them start new businesses.
In China, millions of people were given access to innovative savings products through the digital payment systems, according to the alliance's report.
Alibaba and Tencent made the connections possible, which made China a home to the largest peer to peer lending in the world, the report said.
According to data by Citi, China accounted for more than half of the world's total fintech investments in the first nine months of 2016. It was also the only region where fintech investments grew in 2016.
The growth of Alibaba and Tencent has made China the leader in business-to-consumer (B2C) fintech adoption.
"The rise of the Chinese dragons reflects a unique combination over the past decade of incredibly rapid digitization and the simultaneous rise of the Chinese mass middle class, along with poorly prepared incumbents facing off against entrepreneurial newcomers," Citi analyst Ronit Ghose said.
The analyst also noted that the rise of e-commerce and social media is connected to the growth of the biggest fintech franchises in China, with Alibaba and Tencent serving as indirect proxies.
The two Chinese giants were also favored by brokers and fund companies because of their potential growth prospects.
In 2015, the total global merchandise volume that used Alibaba's e-commerce sites reached $448 billion, which is double the value of the combined volume of eBay with $22 billion and Amazon with $214 billion, Citi said.
Digital ecosystem success
The success of the digital ecosystems created by the two companies may be attributed to building trust, which was considered the biggest barrier to e-commerce.
The digital ecosystem has also become a valuable and trusted tool for most people. For instance, a regular Alipay user can pay his mobile phone bills, hail an Uber ride, transfer money, access a wealth management service, buy movie tickets and make charity donations, among others, using his Alipay wallet. A user with a WeChat wallet can also do similar transactions.
Latest research data by Citi showed that Alipay has a total payment value of about $900 billion, three and a half times bigger than Paypal.
Alipay now offers products and services such as savings, lending and online banking. Through its Sesame Credit, Alibaba's credit scoring system, people can make a loan with little or no collateral.