
Can Apple Pay Succeed in China?
NEW YORK (TheStreet) -- Nearly a year after Apple (AAPL) - Get Report first launched its mobile wallet in the U.S., it seems that a release in China could be quickly approaching, but Apple Pay faces some new hurdles and challenges in this new geography that may translate into a tougher battle.
Talk of Apple's interest in getting into mobile payments in China first surfaced in May when Chinese news agency reported that Apple CEO Tim Cook was speaking to both Alibaba and Chinese banks to bring its mobile payment system to China. "We very much want to get Apple Pay in China," Cook told Xinhua.
At the time it seemed as though Apple might partner with Alipay, the mobile wallet Alibaba (BABA) - Get Report operates through its financial arm Ant Financial. No official announcements have since been made, though, so it would not be surprising to find out that those talks petered out, leaving Apple to attack China's mobile payments market on its own.
An Apple spokesperson did not respond to requests for comment. Ant Financial spokesperson Miranda Shek declined to comment on any partnership with Apple.
"I don't think [Apple Pay's] success [in China] is necessitated by coming up with a deal," said Greg Portell, a partner in A.T. Kearney's Consumer Products & Retail and Media Practices. "When you think about Apple's creation of the ecosystem, they still have that advantage because with that installed phone base it is an easy way to get people to do business with them."
China is already Apple's second biggest market for its devices, which would make the rollout of Apple Pay much easier.
For the third quarter of 2015, Apple reported $13.2 billion in revenue from China alone. For context, the company brought in $20.2 billion from the Americas and $10.3 billion from Europe in the quarter.
Apple Pay has already launched in the U.S. and UK, so it would be no surprise to see the wallet arrive in China. And Apple has already dropped some hints that the launch is approaching.
In September, Apple registered an entity (paywall) in the Shanghai free-trade zone in order to operate Apple Pay in China, according to The Wall Street Journal. Apple has also been beefing up its team in China with some payments experts, as Quartz reported. Earlier this year, Kelly Sang, a former Alibaba general manager, was promoted to director of Apple Pay in China. Plus a former country manager for Visa China, Liang Gong, joined Apple in July. Quartz also found deleted job postings that showed further efforts to hire for the Apple Pay team in China.
Bringing Apple Pay to China is a no brainer, according to Carolina Milanesi, Chief of Research and Head of US Business at Kantar Worldpanel ComTech.
"Apple Pay is part of the Apple experience and it would make sense for Apple to roll it out into China," she said. "I very much see it as a way to give Apple users the full experience."
While it may be an obvious move, that doesn't necessarily mean it'll be an easy one.
China is known for its strict regulations, especially when it comes to banking and payments. Apple will have to work with China UnionPay, the Visa of China, which happens to own all NFC terminals, which are required to use Apple Pay, in the country.
Plus, Apple Pay will be competing against the incumbent mobile wallet in China, Alipay. Alipay already has 270 million monthly active users, and while Apple does not share exact numbers on how many consumers use Apple Pay, PYMNTS estimates that about 3 million consumers use Apple Pay "every chance they get and/or every time they remember." If Apple decides not to partner with Alibaba and Alipay, it will have to convince Chinese consumers to switch over to Apple Pay.
Nonetheless, the fact that Alipay is already popular in China may actually help Apple Pay, similar to the way that Apple Pay has provided a leg up to Android Payin the U.S. by popularizing the mobile wallet in general and getting the infrastructure started.
"Mobile payments are commonplace in China," said Portell. "It's different than when they entered the U.S. and the market was nonexistent. With the infrastructure [in China] being pretty well established, it makes it easier for [Apple] to pick it off as a market."








