Apple Pay’s Path Into China Through Alipay And Union Pay Has Hit A Roadblock

Apple’s attempts to bring Apple Pay to China have hit a few bumps in the road.

“Apple is seeking to cooperate with Chinese financial institutions” including banks for the use of Apple Pay, a People’s Bank of China (PBOC) official said. However, because Apple has not “acknowledged regulators,” it is “unclear whether the product meets the government’s requirements” for a commercial operation.

Adding to Apple’s difficulties in bringing its service to the far east, the U.S. based firm is not only facing regulatory scrutiny, but is also struggling with its relationship with UnionPay, China’s state-owned credit and debit card system operator. According to close sources with first-hand knowledge of the situation, talks aimed at an agreement that would open China to Apple Pay have stalled.

The difficulty with UnionPay may end up being particularly problematic as Apple Pay is NFC reliant. UnionPay controls China’s only NFC-like system and has for the last two years. It is not, however, the mobile payment method favored by Chinese consumers, who have tended instead to gravitate towards quick-response (QR) code systems like the ones run by Alibaba Group’s Alipay, Tencent Holdings Ltd.’s WePay and other mobile application services.

Apple Chief Executive Tim Cook and Alibaba Chairman Jack Ma both noted in late 2014 that their businesses were pursuing a plan to work together. Alipay’s app uses biometric authentication that was reportedly jointly developed by Alibaba and Apple –  with an eye towards building a cooperative payment system in the future, said an Alipay employee who requested anonymity. The popular theory last year was that Apple Pay’s path to China might come through Alipay instead of UnionPay to process iPhone owner transactions.

The companies “have stayed in contact and are preparing for several projects,” the employee said.

However, Alipay has its own difficulties. As of yet, the company has not found a way  to work around the UnionPay system, which is the sole channel for NFC transactions and the arbiter of settlement fees paid by merchants.


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