Apple and Samsung separately entered into agreements with China UnionPay to launch their competing mobile payments systems in the country next year onwards, says Bloomberg. UnionPay is the largest payment and clearing network in China.
Apple, Samsung will compete in China
Apple informed users that now it will be possible for UnionPay’s customers to make purchases through Apple Pay by adding their bank cards to their iPhones, iPads and Apple Watches. Similar options will be available to owners of the Samsung Galaxy and Note.
Apple’s senior vice president of Internet Software and Services, Eddy Cue, said, “China is an extremely important market for Apple and with China UnionPay and support from 15 of China’s leading banks; users will soon have a convenient, private and secure payment experience.”
Apple and Samsung offer somewhat different technologies. Apple Pay puts near-field communication (NFC) into use, allowing users to make payments for purchases through their phone or watch with just a tap. There are more than 5 million point-of-sale machines in China that are NFC-enabled and are owned by UnionPay. Samsung’s service makes use of NFC too, but it also offers traditional magnetic stripe reading technology also.
Conquering China won’t be easy
With the deals with UnionPay, now the two biggest smartphone makers will take their competition in the nascent payments area to the largest market in the world. But in China they will have to compete against third-party service providers, including Alibaba and Tencent.
Market-research firm iResearch reports that Alibaba’s Alipay controlled over 83% of China’s third-party mobile payment market in 2014, while a 10% share was held by Tencent’s Tenpay service. Alipay has more than 400 million real-name registered users, and they all are allowed to make purchases from desktop computers, tablets and smartphones at more than 130,000 retail stores, according to its website.
Apple Pay takes 0.15% of each purchase of the 2% that merchants pay in the U.S., according to a February report in Caixin magazine. Such charges will be too high in China, considering some merchants pay only 0.38% there, says Caixin. Despite the competition and tough terms, China offers opportunities to foreign companies such as Apple and Samsung to make profits from a market where mobile-payment transactions jumped 134% last year, according to central bank data.