Alipay Emerges as the Game-Changer in Healthcare Payments

As a sibling company born from the same Alibaba ecosystem, Alibaba Health has long played the role of the Alibaba Group’s pioneer in healthcare. However, its high-profile approach has frequently met with setbacks. It first gained prominence in the pharmaceutical industry through the Drug Electronic Supervision Network, but its eventual exit was far from graceful, facing strong resistance from retail pharmacies and ultimately forcing it to scale back its efforts. After securing exclusive operational rights for the Tmall Pharmacy Channel, the China Food and Drug Administration (CFDA) recently suspended the pilot program for online retail of drugs by third-party internet platforms, leaving the Tmall Pharmacy Channel effectively “shelved.” With few options remaining, Alibaba Health joined forces with 65 chain pharmacy enterprises to establish the “China Pharmaceutical O2O Pioneer Alliance” and later spent RMB 16.8 million to acquire Guangzhou Wunianqian Pharmaceutical Chain Co., Ltd. This move demonstrates a determined willingness to press forward despite known risks.

Meanwhile, Alibaba DingTalk, a rising star in the enterprise SaaS sector, has been making significant strides and has recently begun to actively explore the healthcare industry. In July this year, Alibaba DingTalk announced its entry into the mobile health market and signed its first vertical cooperation project for community healthcare with the Yuexiu District Government of Guangzhou. The expansion of its CRM services into primary care is not a sudden impulse but rather a strategic move aimed at leveraging the cross-geographical capabilities of SaaS to develop telemedicine and a tiered diagnosis and treatment system.

Although Alibaba Health and DingTalk are full of ambition, hoping to leverage their innate internet DNA—along with openness and inclusivity—to rapidly gain a foothold in the pharmaceutical and primary healthcare sectors, the asymmetry of resources makes it difficult for hospitals and pharmaceutical companies to truly bring them into the fold. Much like the “workplace cold violence” encountered by young professionals, no matter how passionate they are, the seasoned veterans of the traditional healthcare industry maintain an icy demeanor, keeping them at arm’s length and rendering their efforts as futile as punching cotton.

For Alibaba, the exclusivity of existing segments does not mean that new entrants have no opportunity to intervene. The biggest variable lies not with pharmaceutical companies or healthcare institutions, but with payment. In the healthcare industry, apart from the two major entities controlling treatment and pharmaceuticals, only the form of the payment segment remains uncertain.

The state’s implementation of medical insurance cost controls has created a significant opportunity for commercial insurance to participate in healthcare payment processes. Under this broader policy direction, several provinces are planning to entrust the administration, claims adjudication, and settlement of basic medical insurance to commercial insurance companies. This year, more than 50 applications for specialized health insurance licenses are awaiting approval from the China Insurance Regulatory Commission (CIRC). To date, three health insurance companies have received approval: Fosun United Health Insurance, Hetai Life Insurance (in which a Tencent subsidiary participated as an investor), and Aixin Life Insurance, led by the Beijing Insurance Industrial Park.

The primary challenge in integrating commercial health insurance into hospital payment systems lies in information asymmetry. Under such conditions, issues of “adverse selection” and “moral hazard” are inevitable, thereby increasing the operational risks for insurers. In China, insurance companies typically promote commercial health insurance through a “designated hospital” model. The drawback of this approach is that it is difficult for insurers and hospitals to establish mechanisms for shared benefits and risk pooling. Hospitals tend to favor more expensive treatment methods for insured patients, whereas insurers prefer simpler and less costly treatment approaches.

Under this mechanism, there is no alignment of interests between insurance companies and hospitals. This not only hinders the alignment of objectives between insurers and healthcare providers but also impedes insurers’ ability to integrate and analyze patient data from hospitals, resulting in an adversarial relationship between the two parties.

Hospitals, prioritizing data security, are reluctant to grant commercial health insurers direct access to their data. Healthcare IT firms, however, are well-positioned to serve as intermediaries, making partnerships between commercial health insurers and healthcare IT companies an excellent channel for insurers to obtain precise data. Notable examples include the partnership announced this February between Sunshine Property & Casualty Insurance and Neusoft Group, as well as the earlier collaboration between Hailong Holdings and Taikang Life Insurance.

This collaborative model primarily encompasses two aspects: one is data mining and new product development; the other is the optimization of settlement, claims processing, and payment procedures. In addition to data support, another advantage lies in the ability of commercial insurance companies to leverage the hospital resources of healthcare IT enterprises to achieve extensive market coverage in a short period. However, this also conceals a logical pitfall: the health insurance party must never disclose the data information of one healthcare IT company to another party (such as a different healthcare IT company). Since healthcare IT enterprises do not share data with one another, any data leakage would result in incalculable losses. Therefore, such collaborations can essentially only be established on a one-to-one basis. In other words, insurance companies can only sign exclusive cooperation agreements with a single healthcare IT company. Collaborating with multiple companies simultaneously, even with contractual safeguards, easily raises the risk of information leakage, as no IT provider is willing to jeopardize its core data.

Furthermore, this pathway is constrained by a key factor: the regional nature of healthcare IT enterprises. Whether it is Neusoft Medical, Winning Health, or Wanda Information, it is difficult for any of them to secure monopolistic resources on a national scale. Regardless of software capabilities, these firms remain ultimately dependent on asset-heavy medical institutions, and the regional segmentation of such institutions creates conditions for IT providers to dominate their respective local markets. While each provider enjoys a comfortable position as a local leader, penetrating another’s territory to capture a share of the market proves extremely challenging. Consequently, under this model, health insurance companies will collaborate with hospitals as secondary partners following healthcare IT enterprises, ultimately resulting in a regionalized landscape similar to the current healthcare IT market, thereby hindering the formation of an integrated national market.

Of course, in addition to the aforementioned approaches, there is another pathway. I will keep you in suspense for now and first discuss Ant Financial.

As China’s largest mobile payment provider, Ant Financial was spun off from Alibaba and, after more than two years of preparation and expansion, has evolved into a full-service financial group. Currently, Ant Financial operates across multiple business segments, including payments, micro-lending, mutual funds, insurance, wealth management, and credit reporting. Its portfolio encompasses brands such as Alipay, Yu’e Bao, Zhaocaibao, its micro-lending operations, and ZhongAn Insurance, along with emerging internet-based ventures like MYbank and Sesame Credit.

As early as 2014, Alipay launched the “Future Hospital Initiative” to begin its strategic deployment in the hospital sector. However, due to unequal bargaining power, hospitals placed little value on Alipay’s payment innovations, resulting in exceptionally slow adoption among offline hospitals. It typically took two to three months for a hospital to move from initial partnership discussions to going live, reflecting extremely low efficiency. Yet with the rise of mobile payments, Alipay has gradually been integrated into various payment scenarios, achieving over 300 million active users.

Currently, user habits have been established in nearly all payment scenarios, with the exception of a few relatively closed sectors such as healthcare. Consequently, Alipay, boasting exceptionally high user activity and a vast user base, has gained sufficient leverage to be valued by medical institutions and engage in partnerships on equal footing, marking a significant shift from its weaker position two years ago. As of this July, more than 500 Grade A tertiary hospitals across China have joined Alipay’s “Future Hospital” initiative, covering 90% of the country’s provinces.

Ant Financial's Health Business Layout

Alipay not only provides hospitals with “consultation-room auto-debit” and “real-time payment” services, but also offers online anti-scalper technologies through security tools such as “Ant Shield.” In terms of cloud computing, Alipay leverages Alibaba Cloud to deliver information technology upgrade services to hospitals including Shanghai Huashan Hospital and Renji Hospital. Furthermore, by harnessing the ecosystem service capabilities of Ant Financial, Alipay provides hospitals with emerging services such as patient companionship, parking, valet parking, ride-hailing, dining, and delivery, achieving comprehensive coverage across the healthcare industry.

In addition to its focus on “Future Healthcare,” Ant Financial has been actively engaging with the banking and insurance sectors. As of 2015, Alipay, under Ant Financial, maintained partnerships with more than 200 banks. Compared to traditional banks, Alipay can reduce the cost per payment transaction to just RMB 0.02, whereas traditional banks typically incur costs of RMB 0.2–0.3. MYbank leverages big data for risk control, significantly cutting costs relative to traditional banks. In the financing sector, through a model combining the Zhaocaibao platform with insurance, 20 property and casualty insurance companies have joined the “Booster Plan,” collectively providing guarantee services for RMB 150 billion in credit loans. Subsequently, Ant Financial further expanded its footprint in the insurance industry by acquiring a controlling stake in Cathay Property & Casualty Insurance for RMB 1.2 billion.

In terms of building user creditworthiness, Ant Financial’s personal credit scoring system, “Sesame Credit,” was launched in January 2015. Sesame Scores have permeated various aspects of daily life, including clothing, food, housing, and transportation. Once integrated with the People’s Bank of China’s credit system and widely accepted by most public affairs and service sectors, Sesame Credit would be capable of establishing a highly reference-worthy personal credit system. In late February 2016, Guangzhou Women and Children’s Medical Center partnered with Sesame Credit to pioneer the “treatment first, payment later” service nationwide, becoming China’s first credit-based hospital. On May 19, 2016, Ant Huabei announced a collaboration with Huashan Hospital Affiliated to Fudan University in Shanghai and Alipay to launch installment payment plans for medical expenses targeted at individual consumers, with credit limits of up to RMB 50,000. The core enabler behind this initiative is personal credit data.

On September 9, 2015, Zhiye Software, a well-known domestic provider of healthcare IT solutions, signed a strategic cooperation agreement with Ant Financial. This move signaled that Ant Financial was also attempting to integrate resources with healthcare IT companies.

All the above-mentioned initiatives constitute the ecosystem services built by Ant Financial to penetrate the healthcare system. However, it is medical insurance that truly grants Ant Financial access to the core of the healthcare sector. In May this year, Alipay achieved a breakthrough by establishing a strategic partnership with the Shenzhen Human Resources and Social Security Bureau. By linking their financial social security cards to Alipay, patients can calculate and pay for both “medical insurance-covered” and “out-of-pocket” expenses with a single click during medical visits. Among the 17 pilot hospitals, 16 have adopted Alipay’s solution. The project is expected to expand further to cover scenarios such as physical pharmacies and online hospitals, thereby integrating throughout the entire healthcare system. On August 17, Alipay launched features enabling users to manage social security and medical insurance affairs and apply for subsidies. Shenzhen was the first city to offer these services, with Guangzhou, Beijing, Shanghai, Hangzhou, and other cities across China to follow suit. Residents need only open Alipay, navigate to “City Services,” link their social security accounts, and complete tasks related to social security, medical insurance, and subsidy reimbursements with a single click.

As previously analyzed by VCBeat, there are two primary pathways to access patient diagnosis and treatment data: one is through collaboration with hospitals and healthcare IT companies, while the other involves partnering with Human Resources and Social Security Bureaus. This revolutionary breakthrough effectively grants Ant Financial indirect access to hospital patient data. Currently, nearly all patient information—including visit records, treatment details, and pharmaceutical expenditure—is encompassed within the medical insurance system. Unlike healthcare IT firms, which are constrained by regional limitations, Alipay’s dominant position in the mobile payment sector enables it to progressively establish collaborations with local Human Resources and Social Security Bureaus across China. This strategy allows Ant Financial to overcome geographical barriers and build a nationwide network, thereby securing the vast patient big data that commercial health insurers have long coveted—a resource of immeasurable value.

From the perspective of VCBeat (WeChat Official Account: vcbeat), Ant Financial can achieve three things that internet healthcare providers and commercial health insurance companies cannot: first, exceptionally high user engagement and coverage; second, the establishment of a personal credit scoring system based on big data; and third, access to patients’ clinical information within hospitals. These three advantages position Ant Financial as a core hub integrating healthcare, insurance, and finance.

It is conceivable that, building on the payment habits Alipay has established across the entire industry, once Alipay integrates with the social security system and gains access to medical visit information for the majority of patients in China, it can leverage its unique personal credit scoring system—developed through its industry-wide coverage—to not only collaborate with commercial health insurance companies in developing relevant insurance products, but also share data with healthcare IT companies to jointly build and refine a big data-driven intelligent audit system, thereby achieving the goal of controlling medical insurance expenditures. Furthermore, by integrating with the credit systems of financial institutions such as banks, Alipay could provide credit loans and guarantee services to patients facing financial constraints. This pioneering “Human Resources and Social Security Bureau + Healthcare Institutions + Alipay + X” model holds immense potential and promising market prospects.