Mobile payment rivals line up challenge to Alipay

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Smartphone rivals Apple and Samsung are mounting a challenge to Alibaba’s dominance of China’s emerging mobile payment market, after announcing co-operation deals with Chinese bank card network UnionPay.

In twin announcements on Friday, the two companies said they hoped their respective

Apple-Pay-App
Mobile payment rivals line up challenge to Alipay

payment systems would be compatible with UnionPay’s 5bn issued cards early next year, subject to regulatory approval – according to the FT.

Apple said that 15 Chinese banks had agreed to make their cards compatible with Apple Pay, including leading lenders Agricultural Bank of China, Bank of China, China Construction Bank and ICBC.

Samsung declined to say whether it had agreed partnerships with any banks in addition to the underlying agreement with UnionPay.

Mobile payments are a new area of competition between Apple and Samsung, the world’s leading smartphone producers by sales. The two accounted for 37 per cent of all smartphones sold in the third quarter, according to IDC, and this large customer base has driven interest from financial groups in co-operating with the new systems.

Apple Pay, launched in October last year, is available in the US, UK, Canada and Australia; Samsung Pay, which followed in August, is available only in South Korea and the US.

The move into China, the world’s biggest smartphone market, will therefore dramatically expand the potential uptake of both systems. But they will face an uphill battle to take share from local rivals such as Alibaba, China’s leading technology company.

Its Alipay service accounts for 70 per cent of the mobile payments market, according to Mark Natkin of Marbridge Consulting in Beijing, while rival Tencent’s Tenpay platform holds up to 19 per cent. Baidu, best known for its market-leading search engine, launched a mobile wallet app last year.

“They are coming into a market where there are two extremely strong incumbents and a third very strong local company that is making headway. For Apple to gain traction here — it won’t be impossible, but it will be very challenging,” he said.

Apple said in October that more than 1.5m US stores and more than 250,000 shops in the UK will accept payment by iPhone by the end of the year. But it has refused to say how many consumers are using Apple Pay, leading some analysts to question its popularity. An October survey by consumer research company InfoScout and the website Pymnts.com found that only 17 per cent of owners of the iPhone 6 or 6S — the latest models — had used the service.

Samsung said in October that 1m people had signed up for Samsung Pay, which was initially compatible only with its new premium Galaxy S6 range, although this month it launched new mid-range phones that can use it.

Samsung Pay — based on the technology of LoopPay, a US startup the South Korean company acquired in February — can be used with the vast majority of existing magnetic strip readers used in countries like the US, unlike Apple Pay, which requires merchants to install a compatible device.

This aspect could help Samsung to win adoption of its service in China, where its sales have been sliding over the past two years, said CW Chung, an analyst at Nomura.

“If this becomes popular in China, it may help Samsung phones’ acceptance,” he said. “But Alipay really prevails in China . . . Chinese people tend to like Chinese solutions.”

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