Apple is able to tie different products and activities into comprehensive packages of services. Instead of just producing a personal computer or its operating software, Apple pioneered a vision of delivering the whole package of hardware such as one sees with the iPhone. Picture: REUTERS/CARLO ALLEGRI
Apple is able to tie different products and activities into comprehensive packages of services. Instead of just producing a personal computer or its operating software, Apple pioneered a vision of delivering the whole package of hardware such as one sees with the iPhone. Picture: REUTERS/CARLO ALLEGRI

SHANGHAI — Apple on Thursday launched its mobile payments service Apple Pay in China, pitting the US technology giant against strong domestic players in an already crowded field.

The world’s second-largest economy is a crucial market for the California-based firm, and Apple Pay is available in only a handful of other countries including the US, Britain, Canada and Australia.

"Apple Pay launching in China today. Can’t wait for you to try it and see how incredibly easy it is to use!" Apple CEO Tim Cook said in a posting on his verified China microblog.

But unlike most other countries, mobile payment systems are already well-established in China and Apple does not have a first-mover advantage.

China’s mobile transactions were valued at 9.31-trillion yuan ($1.4-trillion) last year, up an annual 57%, one industry estimate showed, and according to the state-backed China Internet Network Information Centre (CNNIC), the country had 359-million online payment users in mid-2015, up almost 18% in six months.

The most dominant mobile and online payment providers are e-commerce giant Alibaba with a nearly three-quarters market share followed by Tencent — operator of the popular messaging app WeChat — at 17.4%, according to Beijing-based BigData Research.

The Apple brand commands a strong following in China, especially among the nouveau riche and emerging middle class, with tales circulating of people selling their kidneys to buy iPhones.

Ray Zhao, an internet industry analyst at Guotai Junan Securities, said: "There is still a chance for Apple Pay to grab some market share. Some loyal Apple users may prefer using it instead of other payment tools.

"But the space for Apple Pay is still small," he added.

One new Apple Pay user said he looked forward to putting the service to the test — to buy his midday meal.

"The process of adding a (bank) card is a bit slow, maybe because it was just launched," said university student Li Xiang. "I’m planning to eat at McDonald’s for lunch and try it out."

Analysts said Apple’s iOS system was both a plus and a minus in China. It potentially provides better security for transactions, but in China most people have homegrown phones with the Android system — which rules them out as Apple Pay users.

Tencent and Alibaba unit Alipay squared off during the recent Lunar New Year, encouraging users to send billions of "red envelopes" — cash gifts traditionally exchanged over the holiday — online instead of in person.

Just two days ahead of the Apple Pay launch, Tencent said it would start levying fees for withdrawing funds from its WeChat Wallet, according to a statement, apparently a move to discourage users from leaving. Rival Alipay said it would not charge.

Apple has found a powerful partner in China, bank card provider UnionPay, which has links to the central bank but has lagged behind technology companies in developing online payments.

"Apple Pay needs to find the right angle to get into the market and it is not as easy as imagined," independent technology analyst Fu Liang said. "China’s market competition is very intense and there are at least a dozen strong players.

"But the market space is big enough.... It won’t be dominated by only a few players," he said.

AFP