Apple Pay has landed in its fifth country, one that offers great opportunities but some significant challenges. Apple announced the launch of Apple Pay in China on its Developer page as well as through the Weibo account of CEO Tim Cook. Chinese consumers will now be able to use the service to purchase items at supported retailers using their iPhones and Apple Watches. But actually the service to let customer pay for goods through a smartphone has been around for years, especially in China. Apple Pay is already being used in the US, UK, Canada and Australia. To gain more of the market, the service needs to expand to more countries. China is the world's largest smartphone market and Apple's second biggest market in terms of revenue. Apple Pay faces key challenges of winning over Chinese consumers. Many of them have already started to pay for items via their phones using services provided by China's two major online companies called Tencent Holdings and Alibaba Group. At the end of last year, 358 million Chinese had been paying for goods via their smartphones and created about 1.5 trillion dollars GMV.
Apple Pay requires retailers to equip their point-of-sale terminals with NFC, or near-field communications technology, which communicates with a similarly-equipped iPhone or Apple Watch. Alibaba's Alipay and Tencent’s Wepay system can conduct transactions by scanning the QR (quick response) codes, which can be read by more phones even with Android devices.To compete with Tencent and Alibaba group, Apple has partnered with UnionPay which is a bankcard association that dominates China’s credit and debit card processing market. Apple Pay is also supported by 19 different Chinese banks and lenders once it decided to open Chinese online payment market. So the service can work with about 80 percent of China's credit and debit cards.
According to the report citing unnamed sources, Apple only gets around 0.07 % per transaction to get the deal and support with Chinese banks compared to approximately 0.15 % which is the rate it charges banks in the US. From my opinion, I think this is not the only reason why Chinese bank unions support apple pay. The way that Alipay and Wepay operates is that the customer has to transfer their money from the bank to their Alipay and Wepay accounts in order to use it. So the Alibaba and Tencent are actually major competitors of Chinese banks. PayPal has been trying to open the Chinese market for years but it has never made any progress because it supports the same service and ask too much transaction fees. I think Apple pay service is actually a disruptive force to Chinese online payment market because it simply offers a platform for trading transitions and does not hold any customers’ real property. As an MIS student, to have the sense to identify what is the real contradiction for a system between upper and lower users is extremely important, also when developing systems such as collective or information sharing applications, we need to think differently to make it disruptive to the current market since we are facing an online service booming market. A lot of nowadays developers explore the market by offering methods among multiple market groups not just traditionally satisfy a fixed target group.
http://www.techtimes.com/articles/134152/20160217/apple-pay-officially-launches-in-china-this-week-but-wechat-and-alipay-will-give-it-a-hard-time.htm
http://9to5mac.com/2016/02/22/apple-pay-china-bank-fees/
Fascinating. Thanks for your insights into Apple Pay's bargain with Chinese Banks and why the banks want to work with Apple. Very insightful.
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