Smartphone makers jockey for dominance of Chinese market

By Zhang Ye Source:Global Times Published: 2015-12-29 22:18:01

Many smartphone makers made aggressive moves into China's booming mobile payment industry at the end of 2015, indicating fiercer competition in the sector in 2016. Analysts said that the addition of mobile payment features may help sell phones, but the market does not seem ready for the switch from QR code payment technology to near field communication.

An Apple Pay logo on display at a restaurant in London in July for the UK launch of the mobile payment service. Apple aims to launch Apple Pay in China in early 2016. Photo: CFP

 It is expected that smartphone makers will introduce a flurry of contactless mobile payment services in the domestic market in 2016.

Apple Inc, for instance, has been pushing hard to launch Apple Pay in China as soon as early next year.

So far, the high-end smartphone manufacturer has cut deals with 15 leading domestic banks, such as Agricultural Bank of China, China CITIC Bank and China Construction Bank, according to Apple's website. 

In a neck-to-neck race, phone maker Samsung Electronics Co has announced its intention to bring its mobile payment service, Samsung Pay, to the Chinese market in early 2016.

Both Apple and Samsung signed agreements on December 18 with China UnionPay, which holds a monopoly on China's payment processing network.

The agreements allow users of Apple Pay and Samsung Pay to pay for everything from meals to public transportation to goods at streetside stores with phones with the near field communication (NFC) - provided that the vendors also have point-of-sale (POS) terminals that support the technology.

On the same day, domestic phone maker Huawei Technologies Co debuted its mobile payment service, Huawei Pay, on its latest flagship smartphone, the Mate S.

On December 24, domestic phone maker ZTE Corp told the Global Times that it plans to roll out its mobile payment service, ZTE Pay, in February or March in partnership with UnionPay.

The moves highlight the growing competition in China's rapidly growing mobile payment market in 2015.

Domestic smartphone payments surged 114 percent year-on-year to 4.4 trillion yuan ($676 billion) in the third quarter, according to a report released by Beijing-based market research firm Analysys International in late November.

A competitive boost

Phone makers' expansions into the mobile payment sector are seen as an attempt to boost their device sales, said Zhang Jie, head of ZTE's mobile payment unit.

"The launch of ZTE Pay will surely help the company sell phones," Zhang told the Global Times on Sunday, noting that he now leads a team of 60 staff responsible for promoting ZTE Pay in 2016.

For a long time, ZTE has been trying to make a dent in the cut-throat domestic smartphone market. It's new budget lineup, called Blade, will be the first to feature ZTE Pay.

ZTE Vice President Yu Yifang predicted that the company will double its smartphone sales in China in 2016 through its "duel brand strategy" of selling both low-end Blade models and high-end AXON models, according to a report on the domestic news portal

The company has sold more than 10 million smartphones in the first three quarters of 2015.

Still ZTE had 2.4 percent of the Chinese smartphone market by the third quarter, lagging behind industry leader Xiaomi Inc, which controlled 16.5 percent, data from the Beijing-based market consultancy Sootoo showed.

The big overseas brands, Apple and Samsung, had 12.4 percent and 8.9 percent of China's smartphone market, signifying the challenge posed by the many domestic phone makers.

Launching a feature that most Chinese consumers need is an effective way for Apple and Samsung to build users loyalty and boost their competitive positions, said Hao Zhujing, an industry analyst with Analysys International.

The winner is?

Thanks to the license ZTE obtained in July 2014, ZTE Pay is also able to support online payments as well as wealth management functions.

Still, analysts weren't very optimistic about ZTE Pay's prospects.

"Phone makers with a lot of brand recognition and a large user base in China will stand out from the competition," Hao told the Global Times on Monday, hinting that Apple is in a better position than other smartphone makers.

But it seems that overseas brands need to put more efforts than their domestic competitors to win the trust of Chinese consumers like Li Qiaoxi.

The 30-year-old woman, who owns an iPhone, has some security concerns about Apple Pay and Samsung Pay.

"I think the thorough globalization achieved by foreign companies like Apple would make their phones easier targets for hackers," Li told the Global Times on Monday.

Still, she acknowledged that security was a problem with all mobile payment services, regardless of  whether they employ NFC or QR Code technology.

"I only spend small amounts with my smartphone," she said.

No immediate threat to Alipay

QR code-based contactless payment offered by Internet companies such as Alibaba Group Holding and Tencent Holdings will remain the mainstream mobile payment method for a while yet, despite smartphone companies' aggressive moves in the mobile payment sector, analysts said.

In terms of safety and convenience, there are no big differences between NFC and QR code technology, so consumers don't have much of a reason to make the shift, said Wang Yanhui, head of Mobile China Alliance.

Besides, retailers aren't prepared to switch to NFC.

China UnionPay still needs time to persuade retailers to spend money in updating their POS terminals to support NFC technology, Hao said.

"Retailers usually have no such intentions, as long as they have the option of QR code, which is widely used due to Internet companies' active promotions with subsidies."

Alipay, which Analysys International said held 71.5 percent of China's mobile payment market in the third quarter of 2015, has been pushing its electronic payment tool into physical stores since 2012.

It is available in more than 500,000 brick-and-mortar stores around China, the company told the Global Times in an earlier interview in early December.

UnionPay cards can be used by more than 26 million merchants around the world, according to the company's website.

Although UnionPay refused to disclose how many POS terminals have been upgraded to support NFC, Wang said about 40 percent of China's POS terminals will support the technology by the end of 2016.

"NFC will be an industry standard when the upgrading is finished, signifying a big threat to the off-line businesses offered by companies like Alipay, " Wang said.

"But Alipay will still hold its crown in the online payment sector given its strong position in e-commerce," Wang noted.
Newspaper headline: The mobile payment push

Posted in: Insight

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