This is significant for Apple and Chinese consumers because China UnionPay, a bankcard network approved by China’s State Council and the People’s Bank of China, enjoys a virtual monopoly. It has issued more than 4.5 billion cards in China, and is available in all cities, as well as in overseas market. China (which has an estimated 100 million iPhone users) is Apple’s most important growth market; in its recent fourth-quarter earnings report, the company reported that the market generated $29.8 billion, or 16 percent, in net sales in 2014.
China UnionPay is the only interbank network in mainland China to link all ATMs. Government regulations mean that all ATMs and Chinese merchants have to use UnionPay to process payments in renminbi, as well as foreign credit card companies like Visa, MasterCard, and American Express, which pay UnionPay a fee for each transaction. Previously, customers made payments on the App Store through their telecom operator, like China Mobile, with their credit cards, or through prepayments.
In a statement, Eddy Cue, Apple’s senior vice president of Internet Software and Services, said “the ability to buy apps and make purchases using UnionPay cards has been one of the most requested features from our customers in China. China is already our second largest market for app downloads, and now we’re providing users with an incredibly convenient way to purchase their favorite apps with just one tap.”
The link-up between Apple and UnionPay is also interesting because it comes after news that Alipay, which was founded by the Alibaba Group, and Apple Pay may consider striking a partnership. An Alipay-Apple hookup may also give the Cupertino-based company more leverage against UnionPay, which was slow to strike an agreement with Apple.
But even though Alipay is China’s largest online payments system and is keen to broaden its online-to-offline business as well, the physical retail market is still overwhelmingly dominated by UnionPay. Furthermore, Alipay is still not available for Apple services, including the App Store.
While it hasn’t been made official, a partnership between the two tech giants seems likely: during a recent visit to China, Cook gushed about Alipay, saying “we love to partner with people that are wicked smart, that have flexible teams, that are product based and we like to push them. I think Jack [Ma, Alibaba Group’s founder] has a company just like that.” Another good sign for Alipay is the decision, made late last month, by the State Council to open its payment system to foreign companies, which could also allow Alipay to expand its physical payment points because it means it no longer has to follow UnionPay’s rules.Featured Image: Francesco Dazzi/Shutterstock