[Editor: this article is written by our guest editor Blair Sugarman. Curiously passionate about all things China Digital, Blair’s forages into the Chinese market all started with a single Weibo account in 2010. Now, Blair is an avid tech blogger writing on all areas of China Digital.]

apple-pay

Following Apple’s annual conference last week, the world has been hotly debating how their new box of tricks will impact the way that we will use the new technology to interact not only with each other, but also the retail environment around us. Using the finger print censor and NFC chip incorporated into the new iPhone 6 and iPhone 6 Plus, and with the cooperation of America’s largest banks and retailers, Apple’s new Apple Pay service paves the way for a more convenient and more efficient retail experience by digitizing the entire transaction process from a single electronic wallet.

Despite recent news of Apple’s security issues, general reaction to Apple Pay has been positive. With a large number of already well-established retailers and credit card providers on board, Apple Pay’s future in the USA looks particularly promising. However, in other countries around the world where Apple isn’t necessarily the technological leader, techies aren’t debating how Apple Pay could revolutionize the shopping experience; rather, they’re asking whether or not it will succeed at all.

Apple’s Current Situation:

Before we touch on this, let’s have a quick recap of Apple’s current situation in China.Platform-wise Android rules the roost, with 70-80% of all devices running one version or another. The reason for this is that the market is dominated by more affordable local brands such as Lenovo, Huawei, and Xiaomi, with Apple’s iPhone coming in 7 place behind Samsung. Baidu, Alibaba and Tencent are seen as the top innovators, with Alibaba and Tencent’s payment services Alipay and Tenpay monopolizing the mobile payment market. Apple’s decision to go back on the move it made last year of prioritizing iPhone release in China is perhaps admittance of the difficult position it faces across the pond.

This being said, it’s not all doom and gloom – Apple’s products are still seen as aspirational and desirable. Although the aforementioned decision resulted in some dissatisfaction amongst Chinese consumers, it hasn’t stopped others shelling out a fortune to get their hands on one early. Many think that Apple have failed in China – but if you were to look at market share for mobile phones over a certain price point, you’d see very different results to the rankings above.

Alibaba and Tencent – The Ones to Watch?

But Apple is first and foremost a hardware company – when it makes software it is tailored for use with or on Apple devices only. In China, the BAT’s are all heavily software focused, dominating the market by offering a vast range of apps and platforms on a variety of device types. Alipay and Tenpay are the two most popular payment methods, with Alipay holding 79.9% market share. Apple will have to face off against these two giants if they want to set up Apple Pay in China.

Although there have been rumors of Apple partnering up with China’s UnionPay to bring Apple Pay to China, their time is also running out. The recent news of Wanda, Baidu and Tencent’s cooperation shows that Chinese companies are also thinking about the O2O process and retail environment. Even though Wanda, Baidu and Tencent individually are fundamentally different to Apple’s business model, together they form a tripod that competes directly with Apple Pay’s new service, with Wanda providing a vast retail network, Baidu offering product search and investment in hardware (have a look at the promotional video for Baidu Eye) and Tencent contributing traffic and software in the forms of Wechat and Tenpay.

Earlier this week Tencent released an update of Wechat with a new ‘Small Payment’ function that produces a virtual bar code that can be scanned in by merchants who support WeChat payments for purchases under the value of 300RMB. As a preliminary step, Tencent has announced that as of tomorrow 9 brands will support this new function, with the future possibility of linking the payment process with the stores official Wechat account for after-sale CRM and greater interaction with the consumer. This is a direct threat to Apple, as Wechat’s omnipresence on multiple platforms shows that you don’t necessarily need to have the latest hardware to be able to pay for a product quickly.

With Apple opening up its API for their finger print scanner on iPhone, app developers will be thinking how they can use the scanner to combine with their apps – but chances of Tencent and Alibaba using it in conjunction with their own payment services in an odd mix of Apple hardware and Chinese software is probably slim, especially when you take into account considerations such as Apple’s overall market share and recent security issues.

Ultimately, the current situation provides an interesting arena to watch these technological gladiators face off in the fierce battle for China’s mobile payments. Apple’s software integration with its new hardware and NFC chip functionality provides a better payment experience for users in possession of the latest iPhone – if Apple does choose to go ahead, they will need to consider the size of the iPhone 6 market in China, which retailers to cooperate with, and how to roll out quickly and effectively. Tencent, as China’s leading software company, is focused on increasing platform functionality to develop mobile payments and build it’s O2O ecosystem. Their partnership with Baidu and Wanda, along with their quick-fire updates of their social messaging app, Wechat, show just how serious they are in becoming the ‘one stop shop’ for Chinese mobile users.. The gloves are off…