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Apple Pay’s great China challenge

Apple Pay’s China strategy is finally starting to take shape. However, the road ahead will be challenging in the face of strong competition from Alipay and Tencent’s Tenpay.

As per leaked staff training documents from MingSheng Bank in China, industry insiders are speculating that Apple Pay will imminently launch in the country in partnership with UnionPay. If true this will be a great milestone for Apple Pay, as China is the single largest NFC market by payment terminal concentration. But while the size of the market is a significant attraction, the competition is also greater compared to other nations.

At present Alipay and Tenpay control 80% of the mobile payments market in China, and it will be difficult for Apple to break this monopoly. While partnering with UnionPay is a sound move, it should be noted that UnionPay is already testing a mobile payments service with Samsung and is in talks with Huawei, Xiaomi, and Lenovo. And on the demand side, small retailers form the majority of NFC payment accepting merchants in China, and Apple will find it difficult to capture this segment as they prefer the lower fees offered by Alipay and Tenpay.

From paying for a taxi ride to ordering a lunch delivery to booking cinema tickets, Alipay and Tenpay already have first mover advantage. Rather than seeking to conquer the Chinese digital payments space, Apple should use the launch of Apple Pay to promote its smartphones and its culture of innovation.

By Arnie Cho, Senior Consumer Payments Analyst

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