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Dong Ximiao: Apple Pay Aims to Dethrone Alipay


Source: Beijing Today    Published: 2016-3-10


Dong Ximiao, a visiting research in Chongyang Institute for Financial Studies in Renmin University of China, was quoted in this article.


Apple Pay became available to Chinese Apple users on February 28. Within 12 hours of its release, approximately 380 million credit cards were added to Wallet, Apple’s payment app, accounting for a third of Apple Pay supported devices in China.

Samsung, a strong opponent in smart phone business, expedited its plans to roll out Samsung Pay in China. Xiaomi, China’s domestic smartphone giant, announced plans to add a similar payment function to its Mi 5 phone.

However, Apple Pay still faces a major hurdle to widespread use in China: a payment world dominated by Alibaba’s Alipay, the most widely used third-party payment platform.

Data from shows that more than 70 percent of all digital transactions in the third quarter of 2015 were settled on Alipay. Ten Pay, the payment system used in WeChat, ranked second with 16 percent.

“Apple’s entry will not have a big impact on China’s mobile payment market. In the next year or two, its NFC payment will not replace paying via QR code,” said Hao Zhujing, an analyst at

Pros and Cons

The biggest difference between Apple Pay and Alipay are the technologies used: NFC or QR codes.

In Apple Pay, phones must be brought close to a point of sale machine that supports NFC payment. After verifying the fingerprint, the payment is completed within two seconds. It can be used in areas even without an Internet connection.

“Speaking from function, NFC payment is more like an updated POS system, which is more to the taste of commercial banks,” Sohu wrote in its editorial.

But there are not enough NFC enabled POS machines in China to support Apple Pay, and store assistants have had trouble instructing customers how to use Apple Pay correctly.

“I visited seven stores in the morning, and only two really supported Apple Pay,” a user wrote on “When I asked the cashier about Apple Pay at McDonald’s, she seems quite confused and said they only supported Alipay and WeChat.”

Chinese netizens also ran into trouble when adding a credit card to Apple Wallet. Li, a woman who wanted to add a credit card to her Apple Wallet, spent nearly four hours getting through the process. When adding her card, she received constant push notifications indicating the process failed.

The biggest drawback for Apple Pay lies in its hardware limitation. Apple Pay can be only used on the latest iPhone 6 and only with iOS 9.2, and only then with a POS machine supporting NFC payment. According to a report from, out of 10 million Union Pay Quick Pass payment devices in China, only 3 million can support Apple Pay.

Why China

On the surface, pushing Apple Pay in China makes sense. Data from the China Internet Network Information Center showed that China had more than 30.59 million mobile payment users in 2015. It was also one of the most dynamic markets in recent years.

Weak adoption of Apple Pay in North America is also a contributor to the company’s Asian push.

First Annapolis, a consulting agency, found that only 20 percent of iPhone owners used Apple Pay more than once in a month in December 2015.

Tracking statistics from market research company Info Scout revealed similarly unsatisfying numbers. A survey of 300,000 people found that only 2.5 percent were using Apple Pay, a sharp drop from when it was first released.

In the meantime, Union Pay has been plummeting as more consumers resolve their transactions using Alipay and WeChat. Since Union Pay lacked payment app technology, working together with Apple seemed like a good alternative.

“Apple needed the inter-bank transaction system that Union Pay already runs. The company brought them access to more than 10 million Chinese credit card holders,” said Dong Ximiao, a visiting research associate in Chongyang Institute for Financial Studies in Renmin University of China.

Apple Pay also worked as a counterattack from commercial banks to third-party payment platforms. Since virtual accounts are not needed for Apple Pay, commercial banks are happy to cooperate and increase their user coverage. It also meets the supervision principles of The People’s Bank of China by confining online payments to small amounts.

A New Era

“Apple Pay is only a mobile payment solution. It’s not really part of the Internet biosphere. If Alipay or WeChat combine their online and offline experience, Apple Pay will soon lose its strength,” said Li Yinghao, the CEO from Qf Pay.

The real beneficiary of Apple Pay’s release remains unclear.

Apple might increase user loyalty or encourage the purchase of more iPhones to support the service. Commercial banks may also benefit by dragging back users from competing payment platforms. Not to mention the arrival of Apple Pay introduces millions of Chinese buyers to NFC payment.

Alibaba is already developing a similar identification function. In Hannover Messe 2015, Jack Ma, CEO of Alibaba group, showed German president Merkel how to purchase the Hannover stamp via its “Smile to Pay” service. The payment process uses face recognition and a smartphone camera.

Apple faces an uphill battle since it is attempting to change the payment habits of Chinese users , especially since Apple Pay, a credit card substitute, faces little advantage when compared to traditional services.

“If Apple Pay tries to win more market share in China, it will need to lower the user cost to distinguish itself from the traditional transaction procedures,” said Hou Benqi, general manager of online banking at Industrial and Commercial Bank of China.

Key Words: alipay   apple   pay  

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