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Apple Pay launches biggest-ever promotion to enhance presence in China

A customer uses an Apple iPhone to pay via the Apple Pay system in this arranged photograph in London, on July 14, 2015. Photo: Bloomberg News

US technology giant Apple has recently launched its first massive Apple Pay promotion in China, a move to enhance the popularity of the mobile payment service among Chinese iPhone users.

The promotion, which lasted from July 18 to 24, provided customers who used Apple Pay to complete payments with discounts of up to 50 percent and reward points up to 50 times that of regular credit cards.

In partnership with UnionPay, a state-owned credit-card system operator in China, and 17 Chinese commercial banks, Apple aligned with 28 merchants and 16 online merchants including Starbucks, 7-Eleven and Mobike to offer the Apple Pay promotion, which is seen as the biggest one since the mobile payment service debuted in the country in February 2016.

In a recent interview with Caixin, a famous Chinese business magazine, Jennifer Bailey, Apple Pay's vice president, said that the purpose of launching the big marketing scheme was to encourage all Chinese iPhone owners to use Apple Pay and attract more first-time users, citing encouraging data that 97 percent of Apple Pay users are satisfied with the mobile payment system.

Push for market share

The promotion of Apple Pay came as Apple is struggling to gain more share of China's competitive mobile payment market which is currently dominated by Alibaba's Alipay and Tencent's WeChat Pay.

According to statistics from Analysys, a Beijing-based research agency focusing on big-data analysis, Alipay and WeChat Pay accounted for 53.7 percent and 39.5 percent of China's third-party mobile payment market respectively in the first quarter of 2017, leaving an extraordinarily small space for other players including Apple Pay to grow. The market share grasped by Apple Pay pessimistically stood at less than 1 percent of China's mobile payment market in the past six months, data from consulting firm iResearch showed.

Many experts think that Apple Pay's push for more market share in China by means of massive promotion and rewards might turn out to be disappointing due to Chinese consumers' entrenched habit of using local mobile payment services.

Li Chao, an analyst from iResearch, said that Chinese consumers are used to Alipay and WeChat Pay to pay for goods they buy at brick-and-mortar retail outlets and online stores because the two apps can be installed on all kinds of mobile devices. Apple Pay is only available on iPhones and Apple Watches, which Li said could be a key barrier for its wider use in China. "The promotion activity might be effective in the short term. But in the long term, Apple needs to figure out more services that can differentiate itself from its rivals," the analyst said.

Another barrier is Apple Pay's near-field communication (NFC), a wireless technology which transmits data from a special chip-equipped handset to a bank through NFC-based point-of-sale (POS) checkout registers. NFC-equipped Apple Pay is less convenient than Alipay and WeChat Pay, which enable consumers to easily complete payments by scanning quick responsive bar codes, but it provides a higher level of security attribute than that of the two Chinese mobile payment tools because it adopts a security technology called tokenization, which transforms users' bank account information into an encrypted token when processing transactions. Users of Alipay and WeChat Pay might risk leaking their bank account information due to the two apps' payment processing.

As it will take a long time to upgrade the POS machines to process NFC-based mobile payment, whether Chinese consumers will accept Apple Pay remains to be seen.

However, Bailey feels confident in the future of Apple Pay in China, saying that the mobile payment service has gained endorsement from 74 lenders across the country, with 10 million physical retailers and numerous apps and websites accepting NFC-based mobile payments. She also said that Apple Pay will add a new feature allowing money transfer between two users, a function that is already available on WeChat Pay.

Currently, Apple Pay accounts for 90 percent of China's NFC-based mobile payment market, Bailey said, citing data from Chinese banks. According to statistics from UnionPay, more than 70 percent of POS machines operated by the bankcard association are equipped with NFC-based mobile payment function.

Consolidation of user base

Believing that the July promotion could not help increase the number of Apple Pay users in China in the short run, some industry insiders interpret the unprecedented marketing scheme as a fresh effort by Apple to strengthen cooperation with the country's first-class retailing and e-commerce platforms in the hope of enhancing the loyalty of its current users to Apple Pay.

This time, Apple selected a number of upscale brands such as Starbucks and Haagen-Dazs as the partners for the July promotion, appealing to the tastes of the white-collar workers in big Chinese cities, who are widely considered as users of iPhone and consumers with above-average spending power. The strategy might well play a role in increasing the loyalty of target users to Apple Pay.

Take kaola.com for instance. The Chinese cross-border e-commerce platform, which participated in the Apple Pay promotion campaign, has been one of Apple Pay's closest partners since early 2016 when the mobile payment service was launched in China. According to a report published on tmtpost.com, a technology website in China, nearly 75 percent of mobile sales of kaola.com are contributed by iOS users, many of whom are middle-class women aged 18-35, seeking better quality of life.

Meanwhile, the big data Apple Pay collects through transaction verification could provide retailers and e-commerce platforms with a gauge that can analyze customers' consuming habits.


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