ALIPAY, the online payment arm under the Alibaba Group, yesterday said it will invest 500 million yuan (US$79.4 million) over three years to boost a cash-on-delivery service to e-commerce merchants and courier firms which will enjoy lower costs.

In the first quarter of this year, Alipay will provide thousands of POS (point-of-sale) terminals to more than 60 regional courier companies nationwide. It plans to introduce 10,000 of the devices in the first half of this year in all first-tier cities, including Shanghai, Beijing and Guangzhou. The POS service will expand to second and third-tier cities by the end of 2012. The firm eyes 60,000 POS terminals in three years.

Alipay's service is expected to lower operation cost for online vendors and delivery firms.

The POS machines will enable merchants to get payments quicker and saves the delivery firms extra work to update the status of orders. Online vendors will get paid after 24 hours of delivery, down from three to four days now. Delivery firms will pay a one-time rent of 500 yuan to use Alipay's service and commissions on each transaction they handle.