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Apple Pay’s biggest expansion: Arriving in China in 2016

Apple Inc (NASDAQ: AAPL) announced on Friday it allied with UnionPay – the only domestic bank card organization in the People’s Republic of China – according to its website. The service will be launched in 2016 after regulators approve the proposal.

Apple Pay is an electronic payment system that works with an NFC chip that connects to a receptor, which accepts the transaction in just a few seconds. Apple Pay is one of the most secure payments systems since it doesn’t save customers data and in most cases the fingerprint of users is needed in order to accept transactions.

Apple Pay, in alliance with UnionPay, will arrive in China next year. Credit: Digital Trends

The service is also available for iPad and Apple Watch. The smartwatch can be paired with an iPhone 5 or later, to buy things just by moving the wrist to the NFC receptor and tapping once over the screen.

Understanding the Chinese market

It was announced by Tim Cook, Apple’s CEO, that China will become Apple’s largest market. According to the company, in the past fiscal year sales in the country increased by 84 percent.

Apple said that the operating income generated in greater China was of $23 billion, which seems impressive since the profits of 2014 reached an amount of $11.04 billion. In other words, the company’s operating margin from Greater China increased to 39% in the past fiscal year, according to the Wall Street Journal.

Economists explain that even when the Chinese economy will not grow as fast as it was growing, Apple products will still be desirable for a big segment of clients who are becoming part of the middle class and who love premium brands.

The iPhone, which is the most important product in the Chinese market of Apple, generates 63 percent of revenues for the brand, and it represents the biggest portion of Apple’s profit.

“Apple Pay has revolutionized the way millions of people pay every day with their iPhone, Apple Watch and iPad. 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,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services.

Apple’s established competition

The Chinese market has a strong base of users who already make payments through their smartphones. The giant WeChat has more than 600 million users in its origin country. There are several features that are integrated into the app related to mobile payments.

WeChat users from China are allowed to pay their utility bills using the app since the company allied with Shanghai Fufeiton Information Technology, a service that manages more than 10 billion yuan ($1.6 billion)  a year in payments.

They can order food from anywhere using the same app since the company allied with OrderIn a popular online food ordering service. The app also helps customers from China to buy homes in the United States and make doctor appointments, buy clothes, movie tickets and send money to their friends.

As reported by Forbes, other third-party payment platforms are well established in China. The Chinese central bank data states that just in 2014 mobile payments grew by 134 percent, which is about $3.5 trillion.  

That being said, Apple is going to enter the segment of mobile payments in China with strength, as they have million of iPhone users living in the country and they allied with the biggest bank card issuer, UnionPay.

“China UnionPay is dedicated to promoting payment innovations and providing secure, convenient mobile payment experiences for its hundreds of millions of cardholders, aligning multiple parties in the industry. We’re very excited to offer Apple Pay among a diverse set of innovative payment options that work with China UnionPay QuickPass,” said Chai Hongfeng, executive vice president of China UnionPay. 

Source: Apple Press Info

Categories: Technology
Daniel Contreras:
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