Upstart Internet companies led by Alibaba Group have been getting a lot of attention lately for shaking up China’s hidebound banking and financial services industry. By offering online investment products with significantly higher returns than ordinary bank deposits, Alibaba and its imitators even rated a shout-out on the front page of the March 2 edition of The New York Times.

But before Alibaba and its affiliates launched the Yu’e Bao investment service with an innovative money market fund last June, the e-commerce giant was already working to make wealth management products more accessible to China’s masses. In late 2012, Alibaba-owned Taobao Marketplace, the country’s largest C2C shopping website, introduced a vertical portal called the Taobao Licai (wealth management) Platform, providing Chinese fund companies, banks and other financial services firms a channel to sell their products throughout the country via the Internet.

Today, Taobao Licai is home to the online storefronts of some 30 top financial services companies, among them GF Fund Management, China International Fund Management, Investco Great Wall, and ICBC Credit Suisse Asset Management. Together, these companies are offering several hundred wealth management products including money market funds, stock funds, bond funds and hybrid funds.

The advent of Taobao Licai traces back to a survey of Taobao users conducted several years ago that found more than 90 percent of online shoppers wanted simpler and more convenient ways to invest, said Zu Guoming, director of the financial management business unit of Small and Micro Financial Services Group, an Alibaba-related company that helps manage the Taobao Licai portal.

Ordinary China consumers have long been deterred from investing by the lack of options. Even semi-sophisticated wealth-management vehicles like stock funds were restricted mainly to the wealthy. Many funds required minimum investments of RMB 50,000, while high-yield products were available only to people with more than RMB 1 million to invest.

Alibaba set out to disrupt the status quo by applying the same formula to financial services that made Taobao Marketplace the country’s largest e-commerce platform. “Our goal was to reduce barriers to entry and make it easier for ordinary people to invest,” said Zu. “Handling fees were high and many customers do not know enough about these products. The product information was available only from fund managers and was not so transparent.”

Taobao Licai allows people to open accounts online, and money can be invested electronically through e-payment provider Alipay, eliminating the need for consumers to visit physical fund company offices or banks. The portal also helps demystify and simplify the process of researching and selecting products, as well as monitoring investment performance. “It’s easier to comparison shop among different products, because funds are all providing information on the same site,” said Zu. “If you invest in traditional channels, it’s hard to find the details of your returns. On our platform, you can log into your account and see the daily return and yield rate.”

Then there are the lower barriers to entry for investors. Fund companies, in order to join the platform, agree to reduce or waive subscription fees, service and handling fees, and investment minimums to make products more affordable for ordinary savers. “We are trying to maximize the buyers’ yield,” Zu explained, citing as an example money market funds that are available on the site offering overall returns that are 10 to 15 percent higher than such funds invested in through conventional channels.

Fund companies have been willing to give ground on fees in exchange for exposure to Taobao’s and Alipay’s huge user bases. Thanks to the efficiencies of the Internet, their selling and marketing costs can also be reduced.

Using conventional distribution channels, fund managers usually pay hefty commissions to banks and other outlets selling products on their behalf. In contrast, Taobao charges a relatively small technology service fee. Fund companies also must invest in infrastructure and marketing to operate their e-shops, as well as pay a fee to Alipay whenever customers move money in and out of their investments. Still, the average cost of acquiring a new customer online is 20 to 30 percent lower than offline, Zu said.

Despite such advantages, Taobao still faces an uphill struggle as consumers and financial services companies get used to the idea of investing via online channels. There’s room for growth: only one-third of an estimated 90 Chinese fund companies have joined the platform so far.

“This phenomenon has really only been happening for the last year, and it takes time for people to get familiar with this,” Zu said. “There’s a learning curve and we are just at the beginning of it.”