Here's how and why Apple Pay finally launched in China (AAPL)
Reuters/China Stringer Network
If you ever visit China and you're a devoted Apple disciple, then you're in luck! You can now whip out your phone and buy souvenirs for your loved ones.
Apple Pay launched in China last week, and a new report from Caixin reveals that a compromise on fee revenue is what finally opened the door for it to happen.
Sources revealed to the site that Chinese state-affiliated card network UnionPay, along with its partner banks, negotiated the fee to a level that facilitated the launch.
Apple takes 0.15% of banks' interchange revenue on each transaction in the United States, but the Chinese banks managed to reduce that fee to 0.07% in China. On top of that, the fee doesn't take effect for up to two years.
The tech giant's fees have caused problems in multiple markets, notes analyst Jaime Toplin from the BI Intelligence research team, Business Insider's premium research service. Apple Pay has allegedly struggled with securing significant bank support in markets such as Canada and Australia because interchange fees are typically lower outside of the U.S., so Apple's fees take a more significant portion of banks' card network revenue in international markets.
In China, that issue was reportedly significant enough to halt talks among Apple, UnionPay, and other banks for almost a year.
But Toplin notes that Apple Pay has already achieved great success in China thus far, which has alleviated some concerns that it could struggle against established powerhouses Alipay and Tenpay, which make up more than 90% of the non-bank mobile wallet market in the world's most populous nation.
Chinese adults enrolled approximately 38 million cards on the day of Apple Pay's launch, with 10 million of those in the first hour, according to local reports.
The debut and subsequent success of Apple Pay in China is yet another example of the changing payments landscape in today's world. But where is this industry headed, and what does it mean for you, the consumer?
BI Intelligence's Payments Ecosystem report, compiled by analysts Evan Bakker and John Heggestuen, drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.
Reuters/China Stringer Network
Here are some key takeaways from the report:
- 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
- Payments is an extremely complex industry. To understand the next big digital opportunity lies, it's critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play.
- Alternative technologies could disrupt the processing ecosystem. Devices ranging from refrigerators to smartwatches now feature payment capabilities, which will spur changes in consumer payment behaviors. Likewise, blockchain technology, the protocol that underlies Bitcoin, could one day change how consumer card payments are verified.
In full, the report:
- Uncovers the key themes and trends affecting the payments industry in 2016 and beyond.
- Gives a detailed description of the stakeholders involved in a payment transaction, along with hardware and software providers.
- Offers diagrams and infographics explaining how card transactions are processed and which players are involved in each step.
- Provides charts on our latest forecasts, key company growth, survey results, and more.
- Analyzes the alternative technologies, including blockchain, which could further disrupt the ecosystem.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
- Purchase the report and download it immediately from our research store. >> BUY THE REPORT