Apple Pay officially launched in China today, its fifth market after the US, UK, Canada and Australia, after sealing a deal with the country’s dominant card-payment processor.
Apple confirmed on its website that it has expanded into China and that its alliance with state-owned UnionPay allows the association’s credit and debit cardholders to use Apple Pay. Nearly 20 banks, including the country’s largest lender, the Industrial and Commercial Bank of China, reportedly will support Apple Pay in the initial phase.
The news is not a surprise since Apple previously said a launch was planned for early 2016. But the company appears to have gained an edge over rival Samsung Pay, which announced an intention to launch in China at the same time but has yet to follow through.
Both Apple and Samsung are partnering with China Unionpay, the country’s largest card payment network, which gives them exposure to hundreds of millions of potential customers, or about 80 per cent of the country’s cardholders.
By comparison, Apple Pay in Canada and Australia is only available to American Express cardholders, a more limiting demographic.
Pinar Ozcan, an associate professor of strategic management at Warwick Business School, said that adoption of Apple Pay in China will depend largely on the alliances Apple builds, particularly with financial institutions.
“As always, a force to consider in China is Alibaba. The giant conglomerate, with more than 400 million Chinese consumers so far, has invested largely on QR codes and more recently on selfie-payments. Rather than a battle between Apple and its competitors in NFC payments, such as Google Wallet, it seems to me that the battle in China might be between Apple and local competitors like Alibaba and Tencent over the actual payment technology,” he said.
E-commerce giant Alibaba’s Alipay dominates the country’s e-payments market.
In the US Apple Pay’s fingerprint-identification system and the storage of consumers’ secure payment details on the phone itself, rather than the cloud, give Apple Pay a big advantage, at least in terms of security as perceived by consumers, Ozcan said. It seems that this will be critical in China as well.
A survey by Deloitte found about 70 per cent of Chinese expressed a willingness to use mobile payments. However, Ozcan said that this and other surveys reveal that a large proportion of Chinese consumers have concerns about the security of mobile payment services.
“This is a clear advantage for Apple as the company is known for its meticulous attention to security, also proven in other industries before like in the case of the mp4 technology that revolutionised the music industry,” he said.