see my reply to 'dengnan. Alipay has users' trust and to them it isn't a terrible experience. Alipay is a bit different than Paypal in the way it integrates with your Taobao purchases. Alipay, at least for Taobao purchases, acts as an escrow agent and is or at least was strongly aligned with the buyer. Paypal has/had a history of generally siding with buyer grievances but the mechanisms of this trust is different enough that Alipay's solution is tailored to the problem effectively.

To your question "Is it the lack of competition..." I would say this is not the case. There has been plenty of competition. Alipay grew its adoption on its integration with Taobao in similar ways as PayPal was integrated with eBay.