Source: The Wall Street Journal Published: 2016-2-23
As Washington gears up for a legal battle with Apple over unlocking an iPhone used by one of the San Bernardino attackers, the electronics giant is getting support from a perhaps unlikely source — Chinese state media — over the safety of its mobile payments.
China’s state-run Economic Daily newspaper on Monday published a story endorsing the security standards of Apple Pay, which debuted in mainland China last week. The newspaper also released previously-unreported information about the long negotiations between Apple and Chinese authorities that paved the way for the mobile payment service to enter the world’s most buzzing market.
“Apple Pay and the technologies it is applied to strictly comply with the country’s relevant standards, in addition to passing the supervising process and other tests and authentications,” the report said.
Apple says on its website that it doesn’t store or have access to the credit or debit card numbers added to Apple Pay.
The report compared Apple Pay to the existing market dominators like electronic-payment services affiliated with Chinese tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. It described Apple as being happier with its current role as a “payment technology provider” rather than engaging in more sophisticated financial services like offering small loans as Chinese third-party payment providers do.
The report, citing an anonymous state bank source, said Apple had set up its database in mainland China as required and would receive inspections and supervision from authorized Chinese organizations at regular intervals.
Foreign tech companies regularly come under scrutiny from Beijing as potential threats to China’s cybersecurity.
In 2014, state broadcaster China Central Television called Apple’s signature iPhone a “national security risk” because of a feature that can track user locations. A month later, Apple said it had moved Chinese customers’ data from overseas into a domestic facility operated by China Telecom, assuaging some of Beijing’s security concerns.
Apple — which relies on China for about 25% of its global sales – also made further compromises.
The negotiation between Apple and Chinese authorities took 3 years, and a central-bank-backed organization named China Financial Authentication carried out thorough checks of Apple Pay’s technical security standards, according to the report.
The report said the protracted negotiation was due to security concerns and disagreement over the financial terms under which Apple Pay would operate.
Without disclosing the detailed financial plan, the report cited another bank source as saying Apple made major compromises due to the firm insistence of Chinese authorities, compared with its regular financial model in the U.S., U.K., Australia and Canada.
“Apple made a bigger concession than the market rumors saying the company largely reduced its charge rate,” the paper quoted the source as saying without further elaboration.
An Apple spokeswoman said the company would not comment on the financial arrangements for Apple Pay.
Some Chinese scholars consider Apple Pay a potential good influence on the domestic market, as it can help in gathering other payment providers to create a bigger market rather than causing chaotic competition.
“Compared with foreign-made bank card and ATM machines, Apple Pay is much less involved in the core of the payments,” Dong Ximiao, Visiting Fellow of Chongyang Institute for Financial Studies of Renmin University of China (RDCY), told China Real Time.
“We should see the common interests here rather than blindly speaking ill of new technologies,” said Mr. Dong.