The Cooperation Between Apple Pay and UnionPay Is Mutually Beneficial

摘要: The biggest challenge for UnionPay in the Chinese market comes from Alibaba’s Alipay and Tencent’s Tenpay. Statistics suggest the Alipay and Tenpay are the dominant players in the current Chinese e-payment market. How could UnionPay achieve breakthrough and manage to become one of the three dominant forces in the market? It seems that political support is no longer as useful as in the past. The biggest problem for UnionPay is the lack of a powerful product.

【观点】Apple Pay找到了中国银联,一场相互取暖的合作

(Chinese Version)

Traditional dominant industries are facing increasing competition from Internet companies, especially from WeChat. On the one hand, social networking tool such as WeChat are gradually replacing mobile carriers; on the other hand, e-payment tools such as WeChat Wallet and Alipay are challenging traditional banks that feature offline services and cash. This challenge is so huge that an increasing number of people have already forgotten UnionPay.

To address the challenge, UnionPay carried out its own app called “UnionPay Wallet” and actively promoted the “QuickPass” service. Still, “UnionPay Wallet” is more like a discount platform, while the user scenarios of QuickPass are too limited compared to other third-party payment tools.

Therefore, UnionPay decided to introduce ApplePay (as well as Samsung Pay) to China after careful preparation. UnionPay announced the move on December 12th, 2016 and finally launched the service on Feb. 18th, 2016, which is already very quickly for UnionPay.

As far as I’m concerned, the cooperation between Apple and UnionPay is more like huddling together for warmth. Nevertheless, such cooperation between industry giants could have a huge impact on the future course of the industry. In this article, I attempt to make some basic analysis and comment.

UnionPay is left with limited number of choices

The biggest challenge for UnionPay in the Chinese market comes from Alibaba’s Alipay and Tencent’s Tenpay. Statistics suggest the Alipay and Tenpay are the dominant players in the current Chinese e-payment market. How could UnionPay achieve breakthrough and manage to become one of the three dominant forces in the market? It seems that political support is no longer as useful as in the past. The biggest problem for UnionPay is the lack of a powerful product.

At present, UnionPay is not able to both develop a powerful app, and acquire the strong management ability of Internet companies in a short time. Thus, UnionPay has to opt for other choices. Coincidentally, Apple has both a very popular smartphone brand and a mature e-payment tool. In addition, Apple is enclosed and consequently safe enough. In this case, cooperating with Apple becomes the top choice for UnionPay. Furthermore, UnionPay can learn experience from Chine Unicom, which made huge success by cooperating with Apple.

The cooperation with Apple becomes even more necessary when we take into consideration China’s promise when entering WTO: By December, 11th, 2016, the interim period is to end, and China is going to open its market totally to foreign banks. Although foreign banks might have to localize themselves in China to better reach Chinese consumers, the possible challenge from these foreign counterparts is quite obvious.

As time goes by, UnionPay finally made up the mind and agreed to make necessary compromise in face of the increasing challenge from Chinese third-party e-payment tools as well as foreign counterparts.

Why the cooperation between UnionPay and Apple pay is mutually beneficial?

Another reason why UnionPay decided to cooperate with Apple might have to do with its relationship with mobile carriers.

Previously, I commented that UnionPay faced a huge problem when promoting payment via NFC technologies: the lack of terminals pre-installed with NFC functions. According to China Mobile’s statistics, the total number of smartphones pre-installed with NFC functions is going to reach 10 million in 2016. The number can be even smaller in practical terms. Without the support from mobile carriers, it could be hard for UnionPay to promote payment via NFC technologies.

However, an insider from UnionPay revealed that they had already given up cooperating with Chinese mobile carriers. Instead, they eyed on Apple Pay, which grabs a fair share of the market in the global market. Apple never fails to attract huge attention from global media every time it releases new products, so UnionPay can actually save the money to publicize Apple Pay by cooperating with Apple.

But does Apple need UnionPay that much? Yes and no. When I say no, I mean Apple is already quite popular for Chinese consumers, so it is able to survive in the Chinese market for a while even without UnionPay’s support; when I say yes, I mean that cooperation with UnionPay can create an important user scenario for Apple, help Apple integrate resources from traditional Chinese banking industry and possibly help it sell more smartphone models. To sum up, Apple does need the support from UnionPay in the long run and in the short time.

Who's to benefit most?

The introduction of Apple Pay (as well as Samsung Pay in the near future) suggests that more and more terminal manufacturers will start to play a role in the NFC payment market initiated by UnionPay. As many insiders have already said, the recent move of Union Pay suggests that it has already started a long march towards being one of the three dominant e-payment platform in China. UnionPay, backed by the entire Chinese banking industry, is going to shake the market and re-arrange the market share of different players. This would be a long fight, and the beneficiaries are not limited to Apple

First of all, it is likely that Apple is going to sell more iPhones in China, gather a huge user base of Apple Pay in a short time and accumulate a huge quantity of user consumption data. Personally, I believe Apple is to be the biggest beneficiary of UnionPay’s new move.

Moreover, Alipay and Tenpay will no longer become the only two dominant players in the Chinese e-payment market. To win over consumers, Alipay, Tenpay and UnionPay are certainly going to offer a huge sum of subsidies to consumers and shop owners.

In addition, other terminal manufacturers UnionPay is willing to cooperate with will also benefit a great deal, now that it has already given up cooperating with Chinese mobile carriers.

In conclusion, the battle has only begun in the Chinese third-party payment market. It’s not important whether you are confident of NFC payment initiated by UnionPay or not. What’s really important is if UnionPay will keep pushing NFC payment by subsidizing consumers, which could be a great way for the lucrative Chinese banking industry to share the large sum of revenue with consumers.

At present, the number of iPhones that can support Apple Pay remains limited, so UnionPay might as well make some quick math, set up a basic standard, and give those users that meet the basic standard an iPhone for free or for only a small sum of money. If so, ordinary user like me will be busy adding our asset in banks and meet the basic standard.

You might wonder If you will still care about such kind of subsidy at that time. Well, at least for me, I still do.

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[The article is published and edited with authorization from the author @Bentoushe, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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