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Seeking deeper market penetration, Apple Pay ties up with taxi service in Shanghai
A customer is paying taxi fare with Apple Watch. Photo: The Paper
Taxi customers in Shanghai can now use Apple Pay of Apple Inc to pay their taxi fare and enjoy a temporary discount policy, as the company is trying to win more users over for its payment application.
Starting from January 4, 2018, more than 10,000 Qiang Sheng taxis in Shanghai would be equipped with point of sale (POS) terminals which allow customers to pay with the Apple Pay application either on their iPhone or Apple Watch, according to Chinese media The Paper.
Apple Pay also offers a discount of 10 yuan for each payment which is completed through Apple Pay until January 31. Each device can enjoy the discount for five times with the same bank card. And there is no need to type in the password for a payment less than 300 yuan. 
The latest expansion of the company’s payment service in China comes three months after its tie-up with China UnionPay, the country’s dominant bank card clearing service, to allow commuters in the southern city of Guangzhou to pay for their subway rides with their iPhone or Apple Watch at more than 6,000 subway gates in the city.
Chinese Internet giants Tencent and Ant Financial, subsidiary of Alibaba, have also started making headway in China’s massive public transport market, which has turned the sector into the new “battlefield” for mobile payments players in China. According to the South China Morning Post, Tencent has already launched service in Guangzhou, Shenzhen, Qingdao, and Foshan by cooperating with local transport operators, while Ant Financial has allowed users to pay for bus fares by scanning a designated QR code in more than 10 cities, including Hangzhou and Wuhan.
“Public transport stands out as one of the new battlefields for e-payments, thanks to high frequency and real demand,” the South China Morning Post quoted Wang Pengbo, an analyst at Analysys, as saying. 
Limited impact
Apple Pay began to launch service in China in February 2016, and it was reported that more than 30 million bankcards were attached to it. While it has been close to two years since Apple Pay’s launch in the Chinese market, it is yet to make a serious dent in the market which has been now dominated by Alibaba’s Alipay and Tencent-backed WeChat Pay. It appears to be a battle between the two Chinese payment giants, which has even expanded to the global market as both are pursuing overseas expansion. 
According to research firm Newzoo, while there were 243 million iPhone users in the Chinese mainland, occupying 33.3% of the 730 million iPhone users around the world, there were only 134 million iPhone users in the United States as of July 2017. But according to Beijing-based research firm Analysys, Alipay and WeChat Pay controlled more than 92% of China’s 18.8 trillion yuan mobile payment market in the first quarter of 2017. 
The success of Alipay and WeChat Pay in China have certain foundations: WeChat Pay is built on its substantial social network, while Alipay is built on Alibaba’s large ecommerce platform. In comparison, Apple Pay only works with Apple hardware, which means it automatically excludes the majority of the Chinese market who use Android phones, though its users are typically high-value consumers. Also, Apple Pay only supports the iPhone6 or newer models.
Another pitfall standing in the way of Apple Pay’s expansion in China is the OR codes rule. The current Chinese mobile payment ecosystem, based on QR code and bar code scanning, is mature, while NFC-based mobile payments, the systems that Apple Pay relies on, are still developing. While NFC (Near Field Communication) can enjoy many advantages over QR codes with its touch-and-go approach and built-in-security, QR code payments have become a widely adopted and deep-rooted habit for Chinese users.
In order to encourage more usage of Apple Pay in China and to compete with local rivals, Apple launched its first large-scale marketing campaign targeting Apple Pay consumers in the Chinese mainland between 18 and 24 July 2017. The offer included discounts of up to 50% for Apple Pay payments made at selected retailers using UnionPay's QuickPass facility, as well as 50 times the usual number of reward points when the payment was charged to a credit card issued by one of 17 Chinese banks.
The one-week promotion is reportedly the largest-ever for Apple Pay in China since its debut on February 18, 2016. 
Commenting on that promotion, a report by research firm Analysys Mason said it has provided Apple with market attention and encouraged Apple Pay usage, but it is not clear whether it will contribute to repeated and sustained usage. And since leading players may launch more promotions in future, it could be more costly for Apple as a latecomer to this market. 
Uncertain future
Apple made it clear when it first launched Apple Pay in China that it wants to work with, rather than compete against, banks and UnionPay. The report by Analysys Mason in July said that is a reason why “existing players may consider Apple to be a partner more than a competitor, which will help Apple to build strong finance partnerships.”
The report also said “while questions remain as to how much share Apple may get in the mobile payment market in China” in the end, it would “depend on how well Apple Pay fits the needs of the local market and how significant an investment Apple and its partners are prepared to make.” 

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