Though Apple Inc hasn't announced a plan to roll out its Apple Pay service in China, some analysts say that if it does they are skeptical the service  would significantly affect the Chinese mobile-payments market

 “Despite strong numbers, China is still overwhelmingly an Android market so there is still some way to go for Apple to achieve meaningful scale in terms of millions of users,” Shiv Putcha, an associate director with the International Data Corp’s (IDC) Asia/Pacific Consumer Mobility and Social Consumer Research team, wrote in an e-mail to China Daily.

“Apple is very late to the payments game with Alibaba and Tencent well entrenched,” Putcha wrote. “Keep in mind … only Apple Pay users can avail this service while virtually all smartphone users can avail payments through an Alipay or WeChat app.”

In October, Apple's new iPhone 6 and iPhone 6 Plus arrived in China despite a regulatory delay in the rollout. Heavy interest from Chinese consumers helped the Cupertino, California-based Apple sell nearly 10 million units within three days of the initial sell date on JD.com. Just a few days later Apple Pay was rolled out nationwide in the United States.

Siyun Zeng, a London-based analyst covering mobile media for international market research firm IHS Technology, told China Daily in an e-mail: “Apple remains primarily a hardware company with most of its revenues coming from device sales. Apple Pay will help drive sales of new devices, but Apple will need to cooperate with the Chinese government as Alipay does.”

Apple Pay would face competition from not only Alipay, but also Tencent’s WeChat Wallet, which Zeng said is integrated in its messaging app and has over 500 million monthly active users.

“Compared to mobile wallets in the US and Europe, existing mobile wallets in China already offer far more comprehensive services, including: bill splitting, taxi hailing, online shopping, merchant location/service searching, buying train/flight tickets, etc,” she wrote. “In addition, we are still seeing new entrants such as Xiaomi, which is beta testing its mobile financial product.

Mobile payments in China have seen explosive growth over the past two years, reaching 5.99 trillion yuan ($965.1 billion) in 2014, according to iResearch, a Beijing-based Internet industry consultancy.

But the boom in mobile payments in China, as reflected by a 391.3 percent year-on-year growth in 2014 and 707 percent growth from 2013, has been driven mostly by domestic Internet giants Alibaba and Tencent, with a combined market share reaching 93.4 percent last year, data from iResearch shows. Alibaba accounted for 82.8 percent of total mobile payments, while Tencent handled 10.6 percent.

Sandy Shen, research director for consumer services and mobile devices at global technology research firm Gartner Inc, said tech savvy individuals who are keen on Apple’s services would be the “early adopters” of Apple Pay in China.

“It takes time for average consumer to learn how to use the service even if they are loyal to the iPhone,” Shen wrote in an e-mail. “But people’s loyalty to the device may not be necessarily translated to apps/services.

“China’s mobile-payment market is dominated by e-commerce/app payment by Alipay and WeChat that have built strong user bases and merchant ecosystems, so Apple has an uphill battle that they need to fight on an ongoing basis,” she wrote.

Samsung Electronics Co remained the world's largest smartphone vendor in the fourth quarter of 2014, with 75.1 million devices shipped around the world (20 percent of the market), according to data from IDC's Worldwide Quarterly Mobile Phone Tracker. Apple Inc followed with 74.5 million units, or 19.85 percent of the global market share.

Apple Pay employs Near Field Communication (NFC) technology, which allows people to tap their iPhones on a point of sale (POS) machine to complete transactions at brick-and-mortar businesses. The payment service uses Touch ID, a fingerprint recognition technology designed and released by the Cupertino, California-based multinational.

Alipay also offers users the option to pay via NFC, but Quick Response codes, or QR codes for short, have proven far more popular.

Shen, with Gartner, wrote: “Our forecast says that NFC will only account for 6 percent of mobile payment transaction value worldwide in 2018. I’d be looking for average consumers around me [to see] whether some will be using Apple Pay.”

“All iPhones now ship with NFC, so this will take care of the hardware equation on the consumer side,” Putcha wrote. “What would be realistic is for Apple to focus on Tier 1 cities like Beijing, Shanghai and Guangzhou. Run pilots with some marquee stores and raise awareness before a mass-market push.

“This will have to be a very top-down approach,” Putcha wrote. “What is much tougher to fix is driving NFC reader adoption on the merchant side.”

Recognizing the need for a local partner, Apple has already initiated talks with China UnionPay, which has helped set NFC standards and initiated a secure platform for banks to load card holder's account information into NFC-enabled phones.

Zeng, with IHS, said Apple has potential to succeed in China but it will “take a few years before NFC payments take off”.

“China is still in the early stages of deploying NFC-enabled terminals,” she wrote. “But we do see increasing efforts from local players, including UnionPay, China Mobile and Alipay, in pushing forward this technology.”

“Mobile payments in China are more than just transactions between buyer and merchants; It is part of a larger ecosystem that users are adapting to,” she wrote. “For Apple Pay to succeed, it has to partner with local players to enter this mobile payments system.”

jackfreifelder@chinadailyusa.com