Mobile Payments China 2

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Apple’s mobile wallet, Apple Pay, has launched its largest promotional campaign in China since entering the market over a year-and-a-half ago, according to the South China Morning Post.

The promotion, which is expected to run from July 18 to July 24, offers shoppers up to 50% off their purchases or up to 50 times the points usually rewarded by their credit cards when they use Apple Pay at select retailers — this promotion is in partnership with 28 offline retailers, 16 online retailers, and 17 banks.

China is arguably Apple Pay’s most challenging market.

  • Two firms already dominate the market, making it unlikely for Apple Pay to capture a significant share. Chinese mobile wallets Alipay and WeChat Pay together make up over 90% of China’s mobile payment industry — as of Q1 2017, Alipay owned 54% of the market, and WeChat Pay owned 40%. It’s very unlikely that Apple Pay would succeed in knocking out these mobile wallets from their top spots.
  • IOS has a relatively small share of the Chinese market, which means a large percentage of the population doesn’t have access to Apple Pay’s service. In the three months ending in April, iOS saw its market share in Urban China rise, but only to 16%, according to data from Kantar Worldpanel cited by Apple Insider. For context, Android’s share rose to 83% in the same period.

So why is Apple Pay investing in this market? 

  • Even with a marginal share of the mobile payments market, Apple Pay could see massive volume. In 2016, Chinese consumers spent $5.5 trillion on mobile payments, which makes it the largest market in the world for these types of transactions. As a result, Apple Pay is likely unconcerned about capturing a large market share, but more focused on becoming the clear-cut third player in the space — even if Apple Pay managed to capture just 5% of the mobile payments market, this would account for $275 billion in volume in a single year.   
  • This usage would likely trickle overseas, which could force more merchants to adopt Apple Pay as a payment option at their stores. China has a large population of outbound tourists each year, and they like to spend when they travel — in 2015, Chinese tourists spent $215 billion abroad, a 53% increase from the $165 billion spent the previous year, according to CNBC. Merchants might be more inclined to accept Apple Pay if they know they could capture a share of this spending, in turn enabling the mobile wallet to capture even more payment volume from Chinese users. 

The U.S. payments ecosystem is in the midst of a shift toward mobile, and countless new and old stakeholders are attempting to accelerate this migration, which is moving at a glacial pace relative to other markets globally. But mobile payments can rise to the mainstream. For companies seeking to build out a robust mobile payments product, China’s thriving mobile payments ecosystem offers some insight — and some lessons.  

BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile payments in China that:

  • Forecasts and compares mobile payments volume, in-store mobile payments users, mobile payments volume per capita, and mobile commerce penetration in China and the U.S. 
  • Overviews the key competitors in China’s mobile payments market, and how new entrants may shuffle the hierarchy of dominant players.
  • Uncovers the key drivers propelling China’s mobile payments market.
  • Identifies which drivers the U.S. can import from China, and which barriers may be standing in the way.

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