CHINA SETTING FOR RIVALS

Apple and Samsung have reached separate agreements with China Union Pay to enter the Chinese mobile payment market.

SAN FRANCISCO: Apple Inc and Samsung Electronics Co reached separate agreements with China UnionPay Co to introduce their competing mobile payments systems in the country next year.

Customers of UnionPay, China’s largest payment and clearing network, will be able to add their bank cards to iPhones, iPads and the Apple Watch for purchases through Apple Pay, the companies said in a statement. Users of Samsung Galaxy and Note devices will have similar options.

While the deals allow the two biggest smartphone makers to take their nascent payments systems to the world’s largest market with the backing of state-backed UnionPay, they will face entrenched competition. Alibaba Group Holding’s Alipay and Tencent Holding’s Tenpay have already built large customer bases for payments on their e-commerce and other business platforms.

“Alipay remains the industry’s dominant player, which Apple Pay would find difficult to surpass in the near future,” Di Jin, an analyst at Forrester Research, said in an e-mail. “The partnership between Apple and UnionPay is a strategy of compromise that is unlikely to help Apple gain more users from their competition, despite UnionPay’s existing mobile payment alliances with banks and internet companies.”

But China still offers an opportunity for foreign companies to profit from a market where mobile-payment transactions jumped 134% to 22.6 trillion yuan ($3.5 trillion) last year, central bank data show.

Apple and Samsung use different technology for their services. Apple Pay utilises near-field communication, which enables users to pay for purchases by tapping their phone or watch with stored bank-card information on a device at cash registers.

UnionPay has more than 5 million pointof-sale machines that are NFC-enabled in China. While Samsung’s service also uses NFC, it offers traditional magnetic stripe reading technology, as well.

Apple Pay charges 0.15% of the value of each purchase made through its system, out of the 2% fee paid by merchants in the US, Caixin magazine reported in February. Such a rate would be too expensive in China, given that the total fee paid by some merchants is only 0.38%, it said.

Alibaba’s Alipay affiliate controlled 83% of China’s third-party mobile payment market in 2014, while Tenpay held 10%, reported market-research firm iResearch. Alipay allows its more than 400 million realname registered users to make purchases from desktop computers, tablets and smartphones at more than 130,000 brick-andmortar merchants, according to its website.

The mobile payments tool will be available for China UnionPay cardholders as soon as early 2016 after tests and certification required by Chinese regulators, the companies said.

Established in 2002 in Shanghai by the State Council and the central bank with shareholders including major Chinese banks, UnionPay has more than 4.6 billion bank cards in circulation, with a network in over 150 countries, according to its website.

“Banks hope to use the UnionPay platform to get involved in the mobile payment segment,” said Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research.”