Apple, Samsung Cut Mobile Payment Inroads in China

Apple and Samsung last week announced separate mobile payment partnerships withChina UnionPay, the only domestic bank card network in the People’s Republic of China.

China UnionPay cardholders will be able to utilize Apple Pay and Samsung Pay via a mobile device. Both services will begin early next year, pending approval and certification from regulators.

China UnionPay cardholders will be able to add their bank cards to Apple Pay on iPhone handsets, Apple Watch and the iPad. Samsung Pay will be available on several Samsung handsets.

Both collaborations will enable the cardholders in China to manage their accounts and make payments via a handset, and each company touted high-level security and contactless payments.

The Chinese Market

With the largest population in the world, China has the largest smartphone market and thus represents a significant business opportunity for both companies’ mobile payment services.

Mobile phone sales grew 9 percent in China this year, while Samsung maintained a lead in feature phones, according to data from research firmEuromontior.

“The collaboration with China UnionPay, coupled with the support from major UnionPay partner banks in China, will bring this secure and easy-to-use mobile payment solution to more Samsung mobile users,” said Injong Rhee, executive vice president at Samsung Electronics.

China is also a key and growing market for Apple, said Eddy Cue, senior vice president of Apple’s Internet software and services division.

“With China UnionPay and support from 15 of China’s leading banks, users will soon have a convenient, private and secure payment experience,” he said.

Level Playing Field

China’s growing middle class is a lure for both companies, and its financial industry likely is keen to build partnerships as a way of ensuring customer loyalty.

“With the rapid development of the mobile payment industry, China UnionPay is committed to open cooperation with other parties in the industry to provide more secure and more convenient products and services for consumers,” said Chai Hongfeng, executive vice president of China UnionPay.

“The UnionPay deals make China a level playing field,” said Roger Kay, principal analyst atEndpoint Technologies Associates.

“Apple and Samsung both have seats at the table, and each will have to prove its worth,” he told the E-Commerce Times. “And may the best man win.”

The Sleeping Giant

China, which has been seen as a sleeping giant since before World War II, is a waking giant now, with a consumer population hungry to utilize its potential spending power.

“The Chinese market is a huge opportunity for Samsung and Apple because of its sheer scale,” said Greg Sterling, vice president of strategy and insight at theLocal Search Association.

“China’s market is at least as ready for mobile payments adoption as the U.S., if not more so,” he told the E-Commerce Times.

“Alipay and WeChat have established strong digital payments momentum, laying the groundwork for other mobile payment tools, so the question becomes which digital payments platforms are adopted, not whether they will be,” Sterling added.

Paperless Money

Mobile payments are building momentum slowly in the United States, as Americans are accustomed to using credit cards — whereas China’s new middle class is new to the concept of alternatives to cash payments.

“China is likely to make the leap into mobile payments faster than the West,” suggested Endpoint Technologies Associates’ Kay.

“With less entrenched infrastructure, China can establish a national standard in a new technology more easily,” he added.

If China takes off, it’s possible the West will follow. Next year could be the one to watch, according to Sterling.

“Mobile payments are set to grow significantly in 2016 as more consumers adopt and more banks and retailers participate,” he said.

“We just changed our retail liability law in the United States this year,” noted Kay. “Our payments systems are still adjusting, and Apple is going its own way against other consortia.”

Apple could be seen as playing nice in China by giving Samsung equal footing, so that Samsung has to compete on its merits alone, he suggested.

“It’s fair and square,” said Kay. “We’ll see how it goes.”