Alipay, China's leading third-party online payment solutionAlipay, China's leading third-party online payment solution



Collateral is a portion of the merchant's funds temporarily held by Alipay during the cooperation period in order to cover potential risks and losses, such as handling buyer chargebacks. The collection of collateral is a common industry practice used by acquirers. The collateral withheld by Alipay is determined by the merchant's transaction volume, risk level, transaction type, and business type, and is managed in a dedicated account.

Why collateral is necessary

When a merchant accepts a payment from a buyer but fails to fulfill obligations, or if the buyer disputes the transaction or the merchant's services, the buyer may file a chargeback. The chargeback amount, as well as any fees that may be charged by the card scheme, is deducted first from the merchant's settlement balance account. However, the merchant's settlement balance account may be insufficient to cover the chargeback amount, in which case the amount is deducted from the collateral. Therefore, collateral serves as a protective measure against potential disputes and other reverse funding gaps that may occur, providing security for both the merchant and the buyer.

How collateral works

Collateral type

Fixed Collateral: The amount of collateral is fixed and is eligible for merchants with a certain scale of stable transaction volumes. Alipay sets collateral charge rules for merchants based on their transaction volume, risk level, transaction type, and business type.

In the long run, Alipay will add more types of collateral to meet different merchant needs, such as rolling collateral.

Collateral charge

Collateral can be charged in the following ways:

  • Alipay deducts funds from the merchant's settlement balance account.
  • Through bank guarantee.
  • Merchant makes direct remittance.

When collateral is deducted from the merchant's settlement balance account, the prerequisite for collateral deduction is that the remaining balance after deducting the collateral is greater than or equal to the minimum settlement amount specified in the settlement contract. If this prerequisite is not met, the settlement funds will accumulate until the prerequisite is met.

Collateral release

The collateral can be released in the following situations:

  • When the collateral charge standard for the merchant is lowered, the excess collateral amount is released to the merchant's settlement balance account.
  • When Alipay evaluates that the merchant no longer needs to pay collateral, the collateral is released to the merchant's settlement balance account.
  • After the merchant terminates the acquiring contract with Alipay, the collateral will continue to be held for approximately 180 days to cover subsequent chargebacks and losses. If there is any remaining collateral after the holding period, it will be returned to the merchant. If the collateral held during the holding period cannot cover the costs, the merchant will be required to compensate for the deficit.

Collateral status

Merchants can view their collateral status in the portal. When Alipay no longer charges collateral from the merchant, the status of the collateral changes from open to closed, and the collateral will be released to the merchant's settlement balance account for settlement.


For example, if Alipay sets the collateral charge rule for a merchant to be 5000 EUR, the following table illustrates how collateral works when collateral is deducted from the merchant's settlement balance account:


Collateral working description

Effective date of collateral charge rule

The collateral balance is 0 EUR.

Settlement date

  1. The settlement amount is 6000 EUR, and 5000 EUR of collateral is deducted.
  2. The remaining settlement amount of 1000 EUR is paid to the merchant.
  3. Settlement reports containing the collateral charge record are generated.

The collateral balance is 5000 EUR.

Table 1. Example of collateral works

Suggestions for reducing collateral

Alipay suggests the following ways to reduce collateral:

  • Reduce order fulfillment time: For example, shorten the payment or delivery time to reduce the order fulfillment time.
  • Reduce chargeback and return rates: For example, improve product quality to reduce chargeback and return rates, or offer refunds proactively to reduce chargebacks.

Note: Reducing order fulfillment time, chargeback rates, and return rates does not necessarily mean a reduction in collateral charges.