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Apple Pay Launches in China

Apple Pay has launched in China, a move which should give it a headstart over many rivals, but also bring it up against tough incumbents.

The iPhone maker has partnered with China UnionPay, the country’s largest clearing network, which means customers of 19 lending banks, such as Bank of China, Industrial & Commercial Bank of China and Agricultural Bank of China, will be able to make payments with their iDevices, through UnionPay’s point-of-sales network.

iPhone owners – which bought 13m of the devices in the first weekend of the latest models – can make purchases using the bank card information stored in the handset, by tapping on UnionPay’s QuickPass NFC terminals.

For UnionPay, this is a strategy to win back business from Internet commerce giants like Alibaba and Tencent, whose Alipay and Tenpay services accounted for two-thirds of online payments in the third quarter of 2015, according to iResearch, while UnionPay had just 11%. UnionPay, unusually in China, supports inter-bank payments and also controls debit and credit card processing, creating a very different financial landscape to that of most other countries, where Mastercard and Visa rule.

But despite the high profile of the iPhone brand in China, even Apple will find it hard to eat away at Alibaba and Tencent – local Chinese applications have repeatedly confounded efforts by global brands to take over the market, especially when it comes to shopping and paying. Apple has been unable to get a payment licence directly, so the deal with UnionPay gives it a good entry point with national reach, although its new partner is not exclusive – it also supports Samsung’s mobile payments service.

Luo Yi, an analyst at Huatai Securities, wrote in a client note: “For UnionPay, its dominance in offline payment markets is gradually losing its appeal, therefore a tie-up with Apple Pay can help it upgrade its technology and fight back.”

Apple was reported, late last year, to be negotiating direct deals with several other banks, including Industrial & Commercial Bank of China, to extend its reach further, but these talks were said to have foundered on the level of fees the US firm was demanding. In the US, these are said to be 15 cents per $100 transaction.

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