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Alibaba agreement could give Apple Pay easier path past Chinese regulators

An alliance with Chinese e-commerce giant Alibaba could help Apple avoid regulatory delays and move Apple Pay closer to debuting in China, according to an executive privy to the ongoing negotiations.

Alibaba Executive Vice Chairman Joseph Tsai gave some insight on his company's talks with Apple in a new interview with The Wall Street Journal published on Monday. In it, Tsai said discussions are progressing with the involvement of Ant Financial, the company within Alibaba that manages its Alipay payment service.

Apple and Alibaba executives are hopeful that an agreement could help their respective Apple Pay and Alipay services gain traction at retail in China.

Tsai said it would be in Apple's best interest to partner with Alipay, providing the iPhone maker with a potential advantage in navigating regulatory hurdles in China.

"If people want to use Apple Pay in China, Apple would have certain restrictions and limitations on operating payment businesses in China," Tsai said. "So we are thinking whether there is any opportunity for us to work together where Apple Pay and Alipay can somehow work together in China."

The Alibaba executive also said that it would be an "obvious possibility" for Apple Pay to utilize Alipay's back-end to process payments. This would enable users of Alipay, which at the moment is largely an online transaction service, to make payments from their accounts at retail.

Alibaba confirmed earlier this month that it's engaged in negotiations with Apple for a potential partnership between Apple Pay and Alipay. While Alibaba is an online powerhouse, Alipay has yet to take off in a meaningful way at retail, relying on clunky QR codes that can be scanned from a user's smartphone.

Apple Pay, however, relies on seamless near-field communication technology, and integrates Touch ID fingerprint scanning for secure authorization of transactions. A partnership is seen as allowing both companies to gain foothold in the Chinese market.

Alibaba is a substantial e-commerce company in China that was founded as is lead by Chinese billionaire Jack Ma, the wealthiest man in China. The company has a number of properties based around finance and payments, including its Taobao website, China's answer to eBay. The company's Alipay service is the largest online payment service in China, accounting for around half of all online transactions in the country.