Photo of Chen Xi, Alibaba and Tracy Ge, Citi.

E-commerce giant Alibaba.com is constantly looking to better support SMEs participating in its online marketplace. As part of this effort it needed to develop a set of cash management solutions that met the demands of a non-traditional model of collections and payments service. Working with Citi, the company addressed the challenge by implementing SWIFT GPI, a virtual account solution, and an automated reconciliation solution.

SWIFT gpi “greatly helps” to address Alibaba’s cash management problems

The challenge

As an important partner of SMEs, Alibaba has been providing online market services to SMEs in China since 1999 and helping them to sell to the world. Alibaba currently has nearly one million customers in 200 countries around the world.

In addition to online marketplaces, Alibaba.com also offers an “online trading platform” and a “one-stop service platform”. It enables Chinese firms to streamline their exporting process. From their Alibaba account, suppliers can access order financing, manage logistics and export. In return, Alibaba gains access to a wealth of trade information and can offer direct benefits to importers in other countries, such as shorter delivery times and detailed supplier exporting data for identification of qualified suppliers.

In order to help more SMEs around the world, Alibaba has exported its successful experience in China to other markets and continues to look to increasing its global footprint. Now, for instance, Malaysian SMEs can also easily complete global sales and global buys through Alibaba.

Collections is one of the major offerings of this “one-stop service platform”. It involves thousands of different industries, different trade patterns, different buyers and millions of transactions from different countries and different currencies. Alibaba needed to develop a set of cash management solutions that seamlessly met the demands of a non-traditional model of collections and payments service.

The solution

Working with Citi, Alibaba developed three solutions to address the overall challenge.

The issue of cross-border remittances is particularly challenging for Alibaba.com when dealing with SMEs. SWIFT gpi has helped greatly here, raising transactional certainty to new heights, with faster settlement also improving overall customer experience by creating predictable settlement times and clear statuses.

Alibaba also implemented a Virtual Account Solution that addresses the need for an automated payer identification service that streamlines reconciliation for electronic receipts. Payer ID, implemented by Citi, can be customised by name and account. A single virtual account number can receive funds in several currencies.

For the third element of the solution, API connectivity and automated reconciliation provided a single-access to a global-connectivity API solution that uses MT942 and MT940 to facilitate intra-day and end-of-day reconciliations. This allowed Alibaba OneTouch to obtain real-time account activity and balance data to meet the customer notification and customer reconciliation needs.

Best practice and innovation

Prior to SWIFT gpi, the upgrade of a corporate bank’s cash management products from bank counter to online banking, from the online banking upgrade to an API connectivity, from the API connectivity to SWIFT.net, was a very complex undertaking. The integrated solution made the enterprise more efficient to deliver payment instructions and related information compared to the previous telegraphic transfer (TT) remittances that plagued companies.

With SWIFT.net and fintech evolving together, the gpi solution made the whole process of TT remittances traceable, the processing time controllable and the transparency of payments is now visible to the treasurer.

Key benefits

• On the payment process, the new payment tracking system can now track every payment from each bank account under Alibaba, and can accurately check the payment status, accurately determine source of funds, time involved and fees of each node in the remittance route.
• For collections through SWIFT gpi, Alibaba can accurately find out the status of each fund, the time taken and cost of each intermediary bank through the route. This eliminated the uncertainty of transactions and payments and enhanced the experience of the entire transaction process. Reverse tracking may be possible in the future to capture all the information once the inbound payment has been released.