Apple Inc. plans to launch its contactless payment system Apple Pay in China, the company’s second-largest market, The Wall Street Journal reported. Apple hopes to launch the mobile payments solution before the Spring Festival holiday on February 8.
Apple introduced Apple Pay on October 20, 2014. After almost a year, Apple pay is one of the most successful in-store payments systems in the world today. Apple has done an exceptional job in making contactless payments mainstream. Without a doubt, Apple Pay can be considered as the game changer that is pushing ahead contactless payments.
Apple Pay works on Apple’s latest iPhone models like the iPhone 6 and iPhone 6S. It is based on the contactless reader technology that lets users tap their devices on readers at stores’ sales counters and complete purchases by scanning their fingerprints.
Apple has struck deals with the four largest banks in China that will allow potential Apple Pay users to link the mobile payments service with their local bank accounts.
Until now, it is not clear how much Apple would charge for purchases made through Apple Pay in China. In the US, Apple gets 0.15% of all credit card transactions and 0.5 cents per debit transaction.
For Apple, China is one of the most important markets due to its prominent presence. In Q3 2015, out of Apple’s $46.9 billion in revenue, China’s share was 27%. The reason behind China contributing such a bigger pie in the revenue is because of the demand for the iPhone in the region.
With Apple making such an impact in China, the potential for Apple Pay in China is also huge. But China is a country where mobile payments are deeply entrenched. There are many players who already contribute to the mobile payments space in a bigger way. Currently, the mobile payments space is dominated by Alipay in China.
Alipay, the leading Chinese third-party payment provider and a subsidiary of Alibaba Group, has become the largest mobile payments company in the world based on the number of users and transaction volume. The Chinese e-commerce giant said that 54 out of every 100 payments made with Alipay come from mobile devices.
The company has reportedly been trying to reach an agreement with the state-run China UnionPay Co., holding a monopoly on credit and debit card payment processing, effectively locking out MasterCard Inc. and Visa Inc.
China UnionPay (CUP) is a domestic bank card issuer which was founded in 2002; it operates under the approval of central bank of China. By 2015, CUP had 36.4% of the market share with more than 260 million Internet and mobile payment users, and transaction value exceeding $1.9 trillion globally. According to CUP’s official website, the company is the biggest international bank organization based on the total number of issued cards and transaction value, with an annual growth of nearly 20%.
After launching in the United States last October and in the United Kingdom this summer, Apple Pay is showing a gradual growth. Most recently, Apple Pay has expanded to Canada and Australia. It will be more interesting to watch how it is going to perform in China – the largest smartphone market in the world – which represents a significant business opportunity for mobile payments systems.