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Found a supplier on Alibaba but not sure how to pay them? In this guide, you will learn how to pay suppliers on the #1 supplier directory, both through the built-in Alibaba payment gateway and ‘off-platform’.
Keep reading and learn how you can pay suppliers by wire transfer, credit card and the secure payment system – and how you can claim a refund if the goods are not matching the product description.
In addition, you will also learn why a refund cannot always be taken for granted, and how you can prepare for, and win, a dispute.
This is covered
- Telegraphic Transfer (Bank Transfer)
- Alibaba Secure Payment (Escrow)
- Alibaba Payment Links
- Alibaba Payment Terms
- Alibaba Online Transfer
Telegraphic Transfer (Bank Transfer)
Alibaba.com is a supplier directory – an online platform for finding factories and trading companies in China, and other countries around the world.
While Alibaba.com has in recent years expanded into providing payment solutions, most buyers go here to find suppliers and then continue business discussions elsewhere. Hence, the transactions are still for the most part made outside of the Alibaba.com ecosystem. That is likely to change in the future but is the case at the time of writing.
We often receive questions about ‘how to pay suppliers on Alibaba’, but the truth is that they are paid the same way as manufacturers that are not listed here – and that is mostly via telegraphic transfer.
In other words, a standard wire transfer.
As said, Alibaba.com acts as the matchmaker, while the conversion between buyer and seller is taken ‘off-page’ at an early stage – including payments.
In short, you manage and pay ‘Alibaba suppliers’ the same way you pay a supplier that you find at a trade show, or anywhere else for that matter. It is still worth to mention though that Alibaba, through its trade assurance program, is also integrating T/T payments into its trading practices.
Note: Alibaba.com often refers to off-page orders as “offline orders”
How does the bank transfer process work?
The first step of the process is to contact the supplier to confirm the their bank account details:
- Beneficiary address
- Bank account number
- Bank address
- Swift code
You can transfer the funds in US dollars from your internet bank directly to the supplier. Note that it normally takes 2 to 4 working days before the funds arrive.
How to avoid payment fraud
You should only transfer money to bank accounts held by a beneficiary (company) matching the company listed on Alibaba.com.
Do not transfer funds to bank accounts in different countries, or those held by other company or individuals – even if such bank account details are provided by a person operating the suppliers account.
Alibaba Secure Payment (Escrow)
While Alibaba.com started out as a supplier directory, it is, through Alipay, one of China’s largest finance companies.
Via Alipay, Alibaba.com offers buyers to pay suppliers through an Escrow system.
So, what is Escrow and how does it work?
This is how Alibaba themselves explains it:
For buyers, your payment will only be released to the supplier after you confirm satisfactory receipt of your order.
For Suppliers, Secure Payment verifies the payment details for every transaction and you are only required to ship the order after your confirmation of payment receipt by Alibaba Singapore City Bank.
In short, Alibaba’s secure payment system allows buyers to make a deposit payment, that is only unlocked to the supplier after the goods are confirmed by the buyer.
Escrow Payment Methods
Alibaba.com integrates with a range of existing payment systems, including the following:
- Credit Card (Maximum: $50,000)
- Telegraphic Transfer (No limit)
- Western Union (Maximum: $5,000)
- QIWI (Maximum: $5,000)
- Web Money (Maximum: $10,000)
- Yandex (Maximum: $1,000)
There are some limitations though, as the Secure payment feature is only available when buying products from suppliers that are part of the Wholesale program.
Thus, it may not be an option for importers of custom-designed (OEM) or private label (ODM) products. Luckily, there are other services available for these types of products.
How does the Escrow payment process work?
Below follows an overview:
1. Customer pays a deposit
2. Supplier ships goods to the customer
3. The products are imported and cleared through customs
4. The buyer receives the goods and either approve or reject the goods.
If the buyer rejects the goods, the payment is withheld. However, additional proof may be required to support the buyer’s position. Keep in mind that Alibaba.com acts as a neutral party, and will not side with the buyer by default.
Always read the product description carefully before placing an order. A product claim can only be filed based on the supplier shipping a product that is not matching the listed specifications (or if it’s clearly damaged or defective).
A refund cannot be based on general expectations or a vague idea of ‘good quality’. Therefore, I advise you to always buy product samples before placing a larger order – even when the transaction is covered by the secure payment system.
Credit and Debit Card Payment
The Alibaba secure payment allows payments via credit card and debit cards, issued by Visa and MasterCard.
However, keep in mind that there is a maximum transaction amount, paid via credit card, of US$50,000. In addition, the credit card companies charge a higher transaction fee, as compared to T/T payments.
Alibaba Payment Links
Alibaba’s payment gateway is increasingly being used as a way to pay small transactions to suppliers, including product samples. Suppliers can create an invoice directly from their Alibaba account which then generates a payment link.
The payment link directs you to the online invoice, which expires automatically after 72 hours.
1. You can be sure that the payment is not diverted to an employee or subcontractor, but goes directly to the supplier’s bank account, or at least an account held by Alibaba.com.
2. Transaction fees are lower compared to bank transfer fees
3. The funds arrive instantly, thereby reducing delays
Alibaba.com Payment Terms
Alibaba.com’s Payment Terms service allows importers in the US to order products with a small deposit upfront (typically 30% of order value), then pay off the balance (typically 70%) up to 60 days later. This deferred payment service helps small businesses manage and improve their cash flow instead of having to tie up their capital right from the start.
The application process is simple, quick, and done completely online. There’s no need to submit paperwork or wait weeks for approval as it normally does when small businesses try to get loans approved to finance their product imports.
Easy application process. To get started, a buyer must fill out a two-page online application. Applying never impacts their credit score.
Improved cash flow. Take up to 60 days to pay for orders. Buyers today are sometimes required to pay in full before their products are shipped. With Alibaba.com Payment Terms, buyers have time and options for how to handle their money by paying 60 days later.
No fees for using the service. If the buyer pays back the amount of the purchase terms on time, using Alibaba.com Payment Terms is free.
Save on transaction fees. Alibaba.com charges a 2.95% fee when making credit card transactions, and other fees are possible when using other payment methods such as TT or ACH. When using Alibaba.com Payment Terms, payments incur no fee.
You can learn more about Alibaba.com Payment Terms in this Q&A with Alibaba New York City.
Alibaba Online Transfer
Alibaba launched online transfer as a payment gateway European importers. Online transfer allows you to make payments in domestic currencies.
Here are some of the countries supported by Alibaba Online Transfer:
- United Kingdom
- $1 – $1,000: $15
- 1,001 – $10,000: $20
- More than $10,000: $25
Questions & Answers
Does Alibaba refund my money if I receive defective or the wrong items?
You can only request a refund under the following two conditions:
a. The supplier failed to ship the goods on time
b. The goods are damaged and/or not as specified on the product page
You should not expect to get a refund if the goods are as specified, but still not matching your expectations. Keep in mind that there is no such thing as a universal or technical definition of ‘good quality’.
To support a refund request, you should provide the following:
a. Photos showing the damages/defects
b. An overview of the defective quantity of products (and the value)
c. A detailed description of all issues
Further, save a copy of the product description before you place your order, so you have some sort of quality reference.
A detailed description of the refund claim process can be found on Alibaba’s website.
How do I win a payment dispute?
It’s a matter of proving the supplier wrong. Some cases can be rather ‘obvious’, especially when the goods get damaged or are severely defective – or not even shipped.
However, we have received reports from disgruntled buyers around the world, claiming that Alibaba has not done enough to protect them when things went wrong.
That said, in all the cases that we received, the dispute was filed based on the product not meeting the buyer’s perceived quality standard.
This is extremely tricky, as Alibaba.com simply cannot act based on this. If they had to issue refunds every time a buyer claimed to not be satisfied with the quality standard – and without the need to return the goods – the sellers would be exposed to systematic fraud and be bankrupted within a matter of weeks.
The truth is that the buyer is not always right, and unless the product quality, design or functions conflicts with the description – it is not fair to demand a refund. To win a refund claim, you need to prove that the products are either damaged / defective or not matching the product description.
Can I pay suppliers on Alibaba.com by Letter of Credit (L/C)?
Yes, as previously mentioned, the Alibaba secure payment system is optional and primarily used for wholesale product transactions. Larger orders are often negotiated and processed outside of the platform.
Just as many buyers rather pay their suppliers directly via telegraphic transfers, you can also negotiate a Letter of Credit (L/C) payment with your supplier.
The procedure is in some ways similar to that of the Alibaba secure payment system, as the funds are ‘unlocked’ to the supplier when certain conditions are reached.
The main difference is that you can set those conditions.
At a minimum, the L/C payment is unlocked once the supplier provides a bill of lading copy – proving that the goods are shipped. However, that only proves that ‘something’ (for example a container filled with bricks) has been shipped.
To further reduce your risk, and tie the payment to the quality and compliance of the products, require the following documents as part of the L/C payment trigger:
a. Quality control test reports (approved)
b. Lab test reports
Keep in mind that you set the payment terms.
Is it safe to pay suppliers on Alibaba.com via Western Union?
You should only use Western Union to pay your supplier if done via one of Alibaba’s payment gateways. You should not use Western Union to pay a supplier directly.
Is PayPal supported by Alibaba.com?
No, PayPal is not supported when paying suppliers on Alibaba.com. This makes sense as Alipay offers a similar payment platform.
Is it safe to pay suppliers on Alibaba.com via PayPal?
PayPal is commonly used when paying for product samples. While PayPal is a trustworthy payment platform, we recommend that you pay for product samples using Alibaba’s own payment gateway. That way you can be sure that the funds are paid to the right company.
How do I pay for product samples on Alibaba?
You can request your supplier to create a Trade Assurance order, which generates a payment link. You can then pay the supplier directly, using your credit card, to ensure that they get started making your product samples fast.
Do you want to launch your own private label or custom designed product?
It can be hard to go from a design drawing to finished product. To help you manage the entire process – from creating a specification to sampling and quality control – we created a Starter Package:
a. Private Label & OEM Product Manufacturer Lists
b. Product Specification Templates
c. Product Label Samples
d. Tutorials, Video Walkthroughs and Task Lists that guide you step-by-step through the entire process
In addition, you can also book quality inspections, lab testing and shipping directly from the platform. Click here to learn more.