Some two billion people still lack access to traditional banking services. Yet, with seven billion mobile subscriptions worldwide, there is a significant opportunity to connect the “unbanked” to digital financial services.
There is also a massive opportunity to provide better mobile payment solutions to those who do have bank accounts in the world’s biggest markets. And while banks struggle to rapidly provide dynamic customer experiences on mobile devices, information and communication technology (ICT) companies are stepping into the void.
Global leaders such as Apple, Samsung and Alipay are all rapidly expanding mobile payment solutions in key initial markets, setting precedents that will have important global implications.
“In terms of global presence and acceptance, Apple Pay still ranks the first as it is available in six countries: the United Kingdom, the United States, Canada, Australia, China and Singapore,” explains Ruomeng Wang, a mobile and telecom analyst with the global information provider, IHS. “In comparison, Samsung Pay is available in the US, South Korea and China, and Alipay is only available in China. However, SamsungPay has more countries scheduled on its launch list, including Singapore, Brazil and Australia.”
Just this month, Apple Pay struck deals with Canada’s banks to bring mobile payments services to the country’s Visa, MasterCard and Interac cardholders. Meanwhile, Alipay is expanding its partnershipwith the global ride-hailing company Uber.
But let’s take a look at how these three giants are addressing the world’s biggest market: China.
China: case study
During the first quarter of 2016, Apple and Samsung, newcomers to offering mobile payments in China, set out to carve market share from local incumbents. However, these local solutions are very entrenched, led by Alipay with more than 400 million active users. This makes it unclear as to the amount of market share newcomers will be able to garner, or the ease with which they will do it.
However, with more than 560 million smartphone users in China – four times higher than in the US – and approximately 358 million people currently using mobile payments to purchase goods and services, and climbing, there is room for growth.
“Given that SamsungPay and ApplePay are handset-based mobile payment services, the competition between them in China is not as much about mobile payments, but rather it centers on the smartphone,” says Wang. “The main competition for Apple and Samsung in China is incumbent Alipay with 400 million active users. Alipay’s advantage is not only market share, it is an OS-agnostic platform used by such operating systems as: iOS, Android, Windows, Symbian and Blackberry.”
Wang predicts that although SamsungPay has advantages that will win some Chinese customers, they will not be enough to unseat Alipay. “SamsungPay works with both NFC and magnetic stripe readers, as swipe cards are still popular in China. This provides both merchants and users an easier transformation to contactless without upgrading their point-of-sale (POS) machines or bankcards,” says Wang. “Yet, SamsungPay still has disadvantages when compared with Alipay. SamsungPay is currently available for in-store payments, while Alipay offers not only in-store but also in-app mobile payments, such as taxi booking, energy bill payment, in-app shopping, P2P payment transactions, coupon and chat-bot services.”
The POS machine issue
The POS machine issue is substantial in that, according to a Research and Markets report, by mid-2015, there were approximately 16 million POS terminals in China. While the number of contactless payment terminals is rising rapidly, Deloitte believes there will still be a minority of merchants supporting contactless smartphone payments and it will take time for the merchants to warrant the cost of POS terminal replacement.
Competitively, this gives Samsung an edge that Apple doesn’t have, as Samsung’s technology works across terminals that feature near-field communications (NFC) plus magnetic stripe options. Apple uses contactless NFC to process in-store payments and the terminals are not yet ubiquitous. Apple launched its mobile payment capabilities in China in February with 19 large Chinese banks as partners, and the company reported that three million cards were activated in just the first two days.
There are no specific regulatory standards for the mobile payments market in China. The winner in the mobile payments battle will be the one that knows and understands the Chinese market and develops services that comprehensively meet a variety of customer needs.
NOTE FROM ITU: Learn more about ITU-T’s Focus Group on Digital Financial Services here.
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