Apple have been in talks with two of the biggest players in China’s domestic mobile payments market – Alibaba’s Alipay and state-owned China UnionPay. It has been reported that Apple Pay were hopeful of being able to get a deal done with both firms by March of this year, however that now looks unlikely as talks with UnionPay have stalled, primarily due to fears that Apple’s technology will render UnionPay’s obsolete, leading to a substantial loss in market share for the Chinese payment giant.
UnionPay currently offer their own NFC-based payments domestically, allowing consumers to make payments using their mobile devices that are either linked directly to Chinese bank accounts or to a registered SIM card, currently supported by mobile operators China Mobile and China Unicom.
This has given UnionPay a monopoly on NFC-based mobile payments, with their only rival being Alibaba’s Alipay, which uses QR-codes instead of NFC technology for their payments. This monopoly is something UnionPay is unlikely to want to relinquish. As well as this, Apple Pay has already reached an agreement to work with Alipay, which would mean that UnionPay would also find them working together with their chief rival, something the company is again likely unwilling to do.
“Letting Apple Pay enter China will have a profound impact,” said an expert on China’s financial sector.
“For UnionPay, cooperating with Apple means opening its settlement system. It would be hard to say who’s in control … UnionPay definitely wants to keep a grip on the system.”
To further complicate matters, it looks likely that Chinese regulators will have their own issues with Apple Pay and the technology it uses. This is due to NFC chips used to facilitate mobile payments in China having to meet a technical standard called PBOC 2.0. Apple’s latest generation of iPhone, the iPhone 6 and 6 plus, meet some of these requirements but not all, making it unlikely that handsets already in the market will be able to use Apple Pay even if an agreement is eventually reached.
“Apple is seeking to cooperate with Chinese financial institutions,” said a representative from the People’s Bank of China (PBOC).
Chinese authorities also want Apple to establish a data centre within China to protect Chinese consumers from data theft, a dedicated Chinese language support centre, and lower fees for Chinese consumers making domestic transactions compared to those Apple Pay is already charging elsewhere.
Right now it’s impossible to say whether or not Apple will reach an agreement with authorities in China, or if state-owned UnionPay will be willing to support rival mobile payment systems in the country at all.