Apple’s mobile-payment system may help UnionPay and Chinese banks fend off rising competition from third-party payment service providers including Alibaba Group and Tencent

Bloomberg
Beijing

China UnionPay Co and Apple Inc have reached a preliminary agreement to introduce Apple Pay in China through UnionPay’s point-of-sales network, people familiar with the matter said.
Details of the agreement are yet to be finalised, pending feedback from banks that issue cards, said the people, asking not to be identified as the matter is private. Shanghai-based UnionPay, the nation’s largest payment and clearing network, aims to introduce Apple Pay as soon as next year, one of the people said.
Apple’s mobile-payment system may help UnionPay and Chinese banks fend off rising competition from third-party payment service providers including Alibaba Group Holding and Tencent Holdings. For foreign companies such as Apple and Samsung Electronics Co, China offers an opportunity to profit from a market where mobile-payment transactions jumped 134% to 22.6tn yuan ($3.5tn) last year, central bank data show.
A Shanghai-based press officer at UnionPay declined to comment. Carolyn Wu, a Beijing-based spokeswoman for Apple, also declined to comment.
Utilising so-called near-field communication technology, Apple Pay enables users to pay for purchases by tapping iPhones or Apple Watches with pre-stored bank card information on a device at cash registers. Through the UnionPay accord, the system could be rolled out to more than 5mn point-of-sale machines that are NFC-enabled in China.
Still, the two companies have yet to sign agreements with any Chinese banks on linking local bank cards to Apple’s payment service, one of the people said. Some domestic banks are concerned about fees charged by Apple Pay and the low number of users the service has, the people said.
A year after its introduction, the system accounts for only 1% of all retail transactions in the US, researcher Aite Group said last month.
Apple Pay charges 0.15% of the value of each purchase made through its system, out of the 2% fee paid by merchants in US, Caixin magazine reported in February. Such a rate would be too expensive in China, given that the total fee paid by some merchants is only 0.38%, Caixin said.
Alibaba’s Alipay affiliate controlled 83% of China’s third-party mobile payment market in 2014, while Tencent’s Tenpay held 10%, according to market-research firm iResearch. Alipay allows its more than 400mn real-name registered users to make purchases from desktop computers, tablets and smartphones at over 130,000 bricks-and-mortar merchants, according to its website.