Date
25 September 2017
PetroChina is said to be in talks with Alibaba about a debit card that allows motorists to pay for oil with oil in its gas stations. Photo Bloomberg
PetroChina is said to be in talks with Alibaba about a debit card that allows motorists to pay for oil with oil in its gas stations. Photo Bloomberg

Oil cards: What happens when Alibaba thinks on its feet

Alibaba’s online financial services business is facing regulatory headwinds but the company is not stopping from testing the limits of innovation.  

The e-commerce giant is targeting oil companies to offer a type of innovative debit card, tapping into a largely underserved motoring market.

It’s either Sinopec or PetroChina (00857.HK) Alibaba wants. China Business Journal reported that Beijing Petroleum Exchange, in which PetroChina has a stake, is in talks with Alibaba on such a potential tie-up.  

A business model has been agreed but no deal has been reached, the report quoted Liu Shaobin {劉少賓}, director of Beijing Petroleum Exchange, as saying.

Petro China denied the report while Alibaba declined to comment.

In any case, Alibaba’s interest in the debit card business is another stab at financial innovation. 

It may be unrelated to an ongoing government crackdown on online financial services that could shake up its Alipay third-party payment platform and its Yu’E Bao online fund, but it sends an important signal to investors ahead of Alibaba’s planned public listing.

The service is not new. Yuan debit cards have been in circulation in certain denominations — 1,000 yuan, for example. The revolutionary oil card will be denominated in liters, meaning motorists will pay for oil with oil.

A typical yuan oil card has a stored value from which an amount is deducted every time its user fills up. In PetroChina’s card, that stored value is in liters which can be used to fill a gas tank to a corresponding quantity. 

Also, drivers can choose to buy a 1,000-liter oil card for, say, 500 yuan, essentially shielding them from price fluctuations.

Liu said these features will set PetroChina’s oil card apart from the rest.

Already, industry sources are predicting the service to attract plenty of fans. An energy investment analyst sees the product as a breakthrough.

“This oil card is equivalent to a miniature oil futures market,” he told the Journal. “Customers could lock in future oil prices by buying oil cards today”.

For PetroChina — or Sinopec for that matter — the oil card will be a revenue driver and a potential opening to related ventures. 

For Alibaba, it will diversify its e-commerce business and spread regulatory-related risk. Liu said proceeds from selling oil cards will be invested through Alibaba’s financial platform.

Alibaba could offer PetroChina a higher return on investment in exchange for the latter’s customer data which it could use to grow its online-to-offline empire.

This is all part of keeping pace with the fast-changing technology space. Alibaba is in lockstep by thinking on its feet. 

– Contact the writer at betsytse@hkej.com

RA

 

EJ Insight writer

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