This week the tech company launched its Apple Pay mobile-payment service in China, the market that Apple Pay vice president Jennifer Bailey told Reuters could be Apple Pay’s largest.
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Unlike in the USA, where at its launch Apple Pay was innovative and new, Australian banks like the Commonwealth Bank of Australia (CBA) have offered contactless payments (to Android users) for two years. “The talks stalled, apparently because Chinese banks argued the charges were too steep”.
States the journal: “Apple started negotiating with major Chinese banks and UnionPay over profit-sharing and technical issues in 2014”. The iPhone maker and the banks finally reached a deal in December.
Citing third-party data, the firm’s analyst Jun Zhang said that the biggest beneficiary of Apple Pay’s push into China will be NXP Semiconductors NV (NASDAQ:NXPI). “The final agreement is a result of compromise from both sides”.
“These 19 banks will pay Apple the fees at a discount, but banks that get on board later may not have the leverage anymore”, a person with the knowledge of the mater said. The platform now allows Chinese consumers to make payments by just waving their device at store checkout readers.
Apple faces competition from industry titans Alipay from Alibaba and WeChat from Tencent. Apple Pay current caters to users who have an iPhone 6 or 6s. The devices are able to wirelessly communicate to banks using a short-range technology called near-field communication (NFC).
Apple Pay has already got off to a good start, having 40 million Chinese users sign up to the service on day one.
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In its latest note to investors, Rosenblatt said that although Apple Pay has gained impressive traction in China in the first two days, it will take some time before the platform becomes a point of a competitive advantage for the iPhone.
