February 25, 2015
Here are some of the latest insights from the world of Apple Pay:
Apple Pay’s China Invasion Stalled
China’s UnionPay and alibaba group are making things difficult for Apple Pay’s entry into the Chinese payments market. Moreover, Apple has not yet received any official acknowledgement from China’s regulators about whether Apple Pay meets all of the government’s requirements, as reported by MarketWatch. Apple has been seeking cooperation with China’s financial institutions for quite a while now, but they have been struggling in establishing a relationship with UnionPay, the key partner for market entry.
Apple Pay relies on NFC to initiate payments. A UnionPay-linked NFC system has existed in China for quite some time now. Smartphone users who have China Mobile or China Unicom SIM cards are already using this NFC system. Others opt to make mobile payments using QR code systems linked to alibaba Group’s Alipay, WePay, and other similar services. As a result, it doesn’t seem like there is enough space in the market for Apple to squeeze in.
There has been speculation that Apple might bypass UnionPay and partner with Alipay to enter the Chinese market. alibaba and Apple had already jointly developed the fingerprint authentication system for Alipay, hence it was expected that they would soon build a cooperative payment system. But Apple and alibaba have yet to find a way to bypass UnionPay.
UnionPay is currently the only channel for NFC transactions in China and also sets the settlement fees for merchants. UnionPay is creating even more barriers for an Apple Pay-Alipay partnership. The rates being charged by UnionPay are too much for Alipay to handle, and may prove difficult for Apple Pay to deal with as well.
Considering regulatory issues, Apple Pay does not comply with the required technical standards. The iPhone chips that drive the payments are restricted in China as per a central bank rule for electronic payment systems. Moreover, the Chinese government has put in a condition that Apple must set up a data center in the China mainland to store all Chinese customers’ Apple Pay related information.
Apple Pay Witnesses Massive Growth in the Number of Supporters in the US
The updated Apple Pay page shows a substantial growth in the number of banks, merchants, and apps that support Apple Pay. 90 US banks now support Apple Pay, and it can now be used for in-app payments in 58 apps and in-store payments across 47 merchants. Considering these numbers, Apple Pay has clearly made huge advances in the U.S.In our last update in December of last year, we had reported Apple Pay’s support at around 31 banks and 25 apps. With the latest figures, the number of banks have tripled and the number of apps have increased by more than two fold within a span of around 2 months. Apple Pay has more than tripled the number of major US merchants in only 5 months (i.e. from 15 to now 47).