PUSHING PAYMENTS

Apple Pay will never match Alipay’s popularity in China

Obsession
China's Transition
Obsession
China's Transition

Apple announced today (Dec. 18) that its Apple Pay service will launch in China in partnership with UnionPay “as soon as early 2016.” UnionPay is a state-affiliated network that issues payment cards for the country’s domestic banks.

Consumers in China are set to spend 9 trillion yuan (about $1.4 trillion) using mobile payment apps this year, according to iResearch, a research firm that tracks the country’s internet industry. That figure is set to double in three years, to 18.3 trillion yuan.

Apple’s foray into mobile payments in China will be an uphill battle.

Tencent and Alibaba, China’s internet giants in social media and e-commerce, have mobile payment apps that are widely used by China’s smartphone owners—including iPhone holders.

In particular, the Alibaba-affiliated Alipay remains the mobile payments app of choice. The company processed $130 billion in mobile transactions in 2013 (it hasn’t released analogous data for 2014). Tencent, meanwhile, has caught on thanks to the popularity of WeChat Payments, which is baked into the ubiquitous WeChat messenger.

Both Alipay and WeChat Payments benefit from social features and other perks that come from being tied into their already popular shopping and chat apps. For this reason, Apple Pay is unlikely to achieve the same scale as its Chinese competitors.

But Apple’s advantage with Apple Pay in China is the same opportunity it has with the iPhone: the user experience. While WeChat and Alipay’s offline payment services are relatively seamless, they still require tapping through an app. Apple Pay, meanwhile, just requires hovering an iPhone over a payment terminal.

Meanwhile, despite having a slim overall market share in China (and the rest of the world), Apple is doing better than ever in the Middle Kingdom. The company’s revenue from “greater China” (which includes Hong Kong and Taiwan) has nearly doubled in one year, thanks to the iPhone 6’s popularity

That’s because Apple is popular among the right group of consumers—rich people who spend a lot. This fact alone bodes well for the company on all fronts, including mobile payments. While Apple Pay might never steal away Alipay users en masse, it’s the perfect tool for a day of luxury binge-shopping for China’s more status-conscious consumers.

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