Apple to launch Apple Pay in China; takes on Alibaba, Tencent

Apple Inc said it will launch its payment service in China as soon as 2016, pitting it against entrenched Chinese rivals Alibaba Group Holding and Tencent Holdings. Apple will partner with China's main bank card and payment firm UnionPay, a state-controlled consortium that has a monopoly on all yuan payment cards issued and used in the country.

UnionPay also plans to tie up with Samsung Electronics Co Ltd's payment system, Samsung Pay, the Chinese firm said in a statement on Friday. The move will see Apple Pay also take on Tencent's WeChat Payment and Alipay, the crown jewel of ecommerce king Alibaba's affiliate Ant Financial, the top player in China's fast-growing online payments market.

Atlantic Equities analyst James Cordwell expects Apple Pay to take a larger share of the market than Samsung Pay, which was launched earlier this year. "I think Samsung Pay depends on Samsung selling devices and I think if anything, Samsung is in retreat in that (Chinese)market. So, I don't see Samsung Pay as a major threat," Cordwell said.

"The bigger challenge is against Alipay or WePay, which are more platform agnostic and have a strong user base. I see that as the main competitive threat to Apple," he said. Eddy Cue, Apple's senior vice president of Internet software and services, said the tie-up with UnionPay and leading local banks would help Apple Pay give Chinese shoppers a "convenient, private and secure payment" option.

"China is an extremely important market for Apple," he said. China, the world's second-largest economy, is one of Apple's most important markets for iPhone and tablet sales, but until now the firm has been kept out of its online payments market.

Online transactions are booming in China, boosted by the proliferation of hundreds of millions of smartphones that are being used for everything from paying for taxis and meals to buying goods at High Street stores. In July, China proposed regulations to shake up the online payment services sector, where companies which own payment systems can reap huge profits by charging transaction fees.