When talking about the preconditions for the success of the Internet, I have talked about the need to develop an an ecosystem, with trust as one element. These issues were also explored in the work on e commerce.
The Chinese solution to the problem of trust in virtual transactions is quite interesting. Almost makes one wish we had enough time to monitor Chinese developments in Chinese.
The ubiquity of counterfeits points to a serious problem in China today: an absence of good faith. In a society where people lack confidence in the integrity of others, a key factor behind Taobao’s rapid expansion was Alibaba’s introduction of the Alipay online payment service in 2004.
Alipay is a third-party platform that provides an escrow system. When you buy an item on Taobao, you make the payment to Alipay. The vendor sees that the customer has paid, but cannot get the money until the customer has received, inspected and acknowledged satisfactory delivery. Only then will Alipay transfer the payment to the vendor’s account.
Further, if the buyer, after inspecting the item, finds that it’s not what is wanted, he or she can return it. Alipay will then post a refund to the buyer’s account.