The challenge

Alibaba.com is constantly looking for ways to improve the trading efficiency of its online marketplace to better serve the suppliers on its platform. With the China-US trade tensions, and now COVID-19, disrupting supply chains and taking a financial toll on suppliers around the world, there is a greater need for Alibaba.com to provide support to its small-and-medium-sized (SME) suppliers, which are facing record-high working capital, cost fluctuations and counterparty risk.

To mitigate the challenges faced by suppliers, Alibaba.com has been exploring the means to track incoming cross-border payments. Unlike outgoing cross-border payments where transactions are tracked through SWIFT gpi, until recently, there was no standardised method of tracking incoming payments. The information was only available reactively through exception handling, which is a highly manual and inefficient process.

The lack of visibility over incoming payments presented several challenges for Alibaba.com and its suppliers, including:

• Lack of certainty over whether payments had been made, impacting the ability of suppliers to forecast liquidity and working capital.
• Inefficient trading processes, as the material purchasing and manufacturing of the goods typically happen only after payments are received.
• Potential disputes over FX and bank fees due to the lack of clarity on deductions.

The solution

Alibaba.com turned to banking partner J.P. Morgan for help, and in May 2020 successfully implemented the SWIFT gpi for corporates (g4C) inbound tracking service, a market leading standardised and automated messaging service that tracks incoming payments.

The solution efficiently tracks the incoming payments made to the 150,000 suppliers on Alibaba.com’s global trading platform, enabling them to detect and monitor inbound transactions in real-time before the proceeds are credited to their bank accounts, dramatically improving certainty of payment, the efficiency of the order cycles, and the experience of both the suppliers and their buyers.

The inbound tracking is able to trace the key steps along the path of a payment from the moment it enters the SWIFT network, including when it’s been initiated, delivered and credited to the beneficiary bank, if it’s been held during intermediary processing for more than six hours, and if it’s been rejected. These status updates are relayed from SWIFT to J.P. Morgan in real-time leveraging application programming interface (API) technology, where the bank in turn notifies Alibaba.com through a second set of APIs. Alibaba.com then extends the same information to its suppliers.

The g4C inbound tracker has been in pilot since the end of Q120 and Alibaba.com is among the first corporates to adopt the service. The solution is currently live in Singapore and Hong Kong.

Best practice and innovation

With the first such standardised tracker in the market, Alibaba.com is now able to accomplish a number of goals not previously achievable.

Key benefits

• Improved supply chain efficiency and working capital management.
• Enhanced visibility.
• Leverages data to optimise payments and improve exception management.
• Reduces disputes.
• Builds trust between suppliers and buyers.
• Instant cross-border payment thanks to the visibility and certainty provided by GPI.

“We empower over 150,000 SME suppliers to participate in global trades electronically and are constantly striving to improve their experience on our online marketplace. The ability to have end-to-end visibility over transactions has significantly lowered the barrier of entry for suppliers to do business online; with the inbound tracking tool, our suppliers are now able to detect and monitor payments, and, based on the data collected, recommend the quickest or most cost-effective payment routes as well as flag unusual payment behaviour,” says Kuo Zhang, CEO.