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Alibaba Group Restructures and Expands Financial Offerings

November 4, 2013         By: Kevin Xu

Alibaba Group’s online payment arm is restructuring in a move designed to prepare the company for its looming IPO.

Zhejiang Alibaba E-Commerce Co Ltd., will now be organized into a new Alibaba company, named Alibaba Small and Micro Financial Services Group.

Alipay, the payment service likened to China’s PayPal, will be a part of this new company. There will be a 60%/40% split for future shareholders, with 60% of the new company’s shares going to investors, and 40% going to Alibaba’s employees.

Alipay was launched in 2004 as a method of payment for Taobao, Alibaba’s online marketplace. Alipay split off from Alibaba Group in 2011 as an affiliate and it is evolving into a broader financial services platform.

Along with payments for products and services, Alipay will allow for Taobao users to pay for financial investments and bill payments, after gaining approval from China’s securities regulators.

According to The Wall Street Journal, Jack Ma, who owns 80% of Alibaba, will hold 7% of Alibaba Small and Micro Financial Services Group. This reduction in Mr. Ma’s stake is within the company’s plan to grant Alipay’s employees an equity stake.

There are signs that Alipay is looking to become more than a payments company. Zhejiang Alibaba E-Commerce acquired Tianhong Asset Management Co. last month, a move cementing Alibaba’s commitment to eventually providing financial and investment services.