Apple Inc. And Alibaba Group Holding Ltd: Real Deal Or Not?

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Apple Inc. (NASDAQ:AAPL) CEO Tim Cook said last week that they’re going to strike a deal with Alibaba Group Holding Ltd (NYSE:BABA)’s Alipay payments service. But was he just blowing smoke, or is there really going to be a deal announced this week?

Such a deal could certainly drive a wedge between Apple and UnionPay, the company’s current Chinese payments partner—but only if it really happens. Writing on MarketWatch, Caixin Online suggests after speaking to a payments industry expert that Apple may just be pulling Wall Street’s leg.

Is Apple just pulling a stunt?

Chen Jianwei reportedly said UnionPay remains Apple’s best payments partner in China and probably will be for quite some time. The company holds a dominating position in offline payments and has a wide network of point-of-sale machines.

UnionPay is also backed by the Chinese government, which only recently made it possible for new bankcard associations to be established. Apparently Alipay is interested, but it would take a long time before any competitor could catch up to UnionPay.

Apple Pay with limits in China?

Chen said just a handful of convenience stores and automated sales machines are able to take payments from Alipay. As a result, he questions why Apple would launch Apple Pay with such a deep restriction on where it can be accepted.

Another expect who’s with a bankcard association also said that it seems unlikely Apple would partner with Alipay because of how few merchants accept it. Point-of-sale machines don’t take Alipay, and the majority of offline merchants don’t take it either. As a result, Apple Pay would be greatly limited in China.

Apple and UnionPay partner

Apple has already struck a preliminary deal with UnionPay that allows iPhone 6 users to link their smartphones to the company’s cards. However, the deal isn’t final, and the details could change.

According to Chen, Cook may be getting impatient with UnionPay and simply using his remarks about Alipay to put some heat on UnionPay. However, he notes that regulatory restrictions may be hindering the deal between the two companies in addition to UnionPay’s slowness.

According to the MarketWatch post, a source “close to regulators” claims that the talks have moved to a key stage, although that source reportedly didn’t provide any further deals. He also said Apple’s strategy now involves reaching out to Alipay while negotiating with UnionPay.

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