Apple, Samsung Entering China’s Crowded Mobile Payments Market

Going up against stiff competition from China’s homegrown players, Apple and Samsung have inked deals with UnionPay, China’s largest payments and clearing network, to enter the mobile payments space in China by early 2016.

One regulatory hurdles are cleared, Apple Pay and Samsung Pay plan to launch in a $3.5 trillion market dominated by entrenched Chinese rivals Alibaba and Tencent. Over 80 percent of China’s 400 million mobile payments users make payments on Alibaba’s Alipay, via its e-commerce and other platforms. Tencent’s Tenpay, available through chat application WeChat, holds another 10 percent of the market.

An advantage that both Apple and Samsung have over Chinese rivals is their near-field community technology that can record payments through placing the phone over a terminal. Alipay and Tenpay require tapping through an app.

The agreements come as state-backed UnionPay strengthens its own mobile payments business. UnionPay signed a mobile commerce deal with venture-backed UK startup, Powa Technologies, creating a 10-year long joint venture to launch PowaTag UnionPay, for customers to pay for in-store purchases with the PowaTag. The initiative aims to reach 50 million users within a year of launch – a reasonable number given that UnionPay boasts 260 million cardholders, 4.5 billion bank cards issued to-date, 26 million merchants, 1.9 million ATMs, and coverage across China. UnionPay had previously launched its own QuickPass mobile payment system in conjunction with 20 Chinese banks.

Competition between foreign and domestic rivals is bound to intensify in China. CEO Tim Cook has stated that China, which brought in $12 billion of revenue for Apple in the last reported quarter, will eventually be the company’s top market. A roll-out of Apple Pay in Singapore and Hong Kong is planned for next year as well.