Apple partners with UnionPay to bring Apple Pay to China

iPhone- and Watch-based payment service slated to hit China in early 2016

Apple Pay sticker 2
Ryan Faas

Apple today announced it had partnered with China UnionPay, the state-run company that is the country's only bank-card issuer, to bring Apple Pay to the People's Republic of China (PRC).

"China is an extremely important market for Apple and with China UnionPay and support from 15 of China's leading banks, users will soon have a convenient, private and secure payment experience," Eddy Cue, Apple's top executive for the Cupertino, Calif. company's mobile point-of-sale payment service, said in a Friday statement.

Cue is right about China being an important market for Apple: In the fiscal year that ended Sept. 30, the Greater China region -- the PRC, Hong Kong and Taiwan -- was responsible for 25% of Apple's total revenue, second only to the Americas. More importantly, Greater China accounted for most of Apple's growth. In the most recently-reported quarter, the region's revenue jumped 99% over the same period in 2014.

Apple Pay works on the latest iPhone models -- including last year's iPhone 6 and this year's 6S -- and relies on near-field communication (NFC) to let users tap their smartphones on check-out point-of-sale readers to authorize payment. The Apple Watch can also make Apple Pay payments when paired with an iPhone 5 or later.

Today's announcement built on the existing relationship between Apple and China UnionPay: In November 2014, the two firms struck a deal that allowed UnionPay-issued credit and debit cards to pay for digital goods on the App Store.

Apple Pay will roll out to UnionPay cardholders in the PRC "as soon as early 2016," Apple said, although the timeline may be uncertain as the service requires regulatory approval. Last month, the Wall Street Journal (subscription required), citing unnamed sources, said that Apple Pay would launch in China as early as February.

China UnionPay has a lock on the Chinese market credit card market, as the company is not only state-controlled, but holds a monopoly on processing bank-card payments in the PRC. However, in October the government's ruling State Council said others, including Visa and MasterCard, could apply to set up bank-card processing in the country.

UnionPay also has its own just-launched contactless payment service, dubbed Quick Pass: Apple Pay will work on Quick Pass-enabled terminals. The Quick Pass digital wallet supports cards from 20 Chinese banks, and runs on Android smartphones.

But other services have a larger footprint in China, and Apple has an uphill battle in replacing them or eroding their shares. Two huge Chinese technology firms -- Alibaba and Tencent -- have the largest portion of the e-payment market with their Alipay and WeChat, respectively. The latter -- a messaging client at its root, but with an immense ecosystem of add-ons -- offers electronic payment when the user's account is linked to a card.

Neither Apple or China UnionPay disclosed the financial terms of the deal -- specifically, what portion of each Apple Pay transaction that Apple receives.

Copyright © 2015 IDG Communications, Inc.

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