The road for foreign payment brands such as Apple Pay to enter China is destined to be a difficult one

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Recently, the US payment app Circle announced the establishment of an independent company, Circle China, to officially enter the Chinese payment market. In February this year, Apple Pay entered the mainland market as scheduled. At the WWDC conference, Apple couldn't wait to announce that it would release a web version of Apple Pay in the fall. It seems that Apple is determined to fight for a place in the Chinese mobile payment market.

China is indeed a huge mobile payment market, so huge that no payment company dares to ignore it. In terms of amount, the quarterly report released by the central bank shows that in the first quarter of 2016, China's mobile payment business reached 5.615 billion, with an amount of 52.13 trillion yuan, up 308.08% and 31.05% year-on-year respectively. The rapid development of China's mobile payment is mainly due to the latecomer advantage. Unlike the United States and other regions, China does not have a deep-rooted tradition of using credit cards, and directly upgrades from cash payment to mobile payment. Although the number of mobile payment users and the penetration rate in China are higher than those in the United States, there is still a lot of room for development in China's mobile payment market. At present, China's mobile payment users are mainly distributed in first-tier and second-tier cities. In the future, the development space of mobile payment will be distributed in China's vast rural areas. In August 2015, Tencent Zhiku's survey on the use of mobile payment by netizens in different regions of China also showed that the use of mobile payment in first-tier and second-tier cities is basically the same, with 3/4 of netizens using mobile payment; the penetration rate in third-tier cities is lower than that in second-tier cities; the penetration rate in fourth-tier cities and rural areas has dropped to 57.7%. With the popularization of 4G and smart phones in rural areas, mobile Internet will become the main way for consumers in these areas to access the Internet. The rapid development of mobile e-commerce in rural areas will drive the second climax of China's mobile payment market.

Another driving force for the growth of China's mobile payment market is cross-border e-commerce. eMarketer predicts that in 2016, more than 15% of Chinese people will make cross-border e-commerce purchases, with a total transaction volume of US$85.76 billion and an average expenditure of about US$473.26 per buyer. Such a large and growing market is very attractive to various payment companies and payment applications. However, if you want to eat this "fat piece of meat" in China, you must have diamond teeth. According to data from Stenvall Skoeld & Company, iPhone users are mainly distributed in large coastal cities in China. Although the figure below shows the distribution in 2012, the price of iPhones of more than 5,000 yuan is still a burden for consumers in rural areas; in contrast, domestic smartphones with similar configurations are more attractive at less than 1,000 yuan. The mobile payment market in China's large cities has long been divided up by Chinese local payment brands, such as Alipay, WeChat Pay, Baidu Wallet, JD Wallet, etc. A YouGov survey shows that 40% of Chinese netizens are satisfied with the current mobile payment tools they use and do not need Apple Pay. In addition, the survey shows that about 50% of Chinese netizens do not use Apple Pay mainly because they do not have Apple devices, which is consistent with the analysis in the previous article. China's local mobile payment tools have their own characteristics, and these functions for Chinese consumers have a certain appeal. 21% of netizens believe that local mobile payment functions such as sending red envelopes are more attractive.

Apple Pay needs to work hard to attract consumers in China's big cities, and the number of users will not increase significantly in the short term. In rural areas, due to the low penetration rate of Apple devices, it is difficult for Apple Pay to gain opportunities from the development of mobile Internet and mobile e-commerce in rural areas.

Of course, Apple Pay is not completely without a chance of success in China. If foreign payment services such as Apple Pay want to enter China, they must first understand Chinese mobile payment users and the reasons why they use mobile payment. According to a survey conducted by Tencent Zhiku in August last year, the biggest motivation for Chinese consumers to use mobile payment is convenience (53.9%) and discounts (49.2%). Surprisingly, few respondents said that they use mobile payment just for novelty, and the recommendations of family, friends or the media have little impact on this. This shows that Chinese consumers are still relatively rational in the use of mobile payment. On the other hand, current Chinese smartphone users are still somewhat concerned about the security of mobile payment services, and more than two-thirds of netizens are worried about the security of mobile payment. iOS is superior in terms of security due to its closed operating system approach. Whether Apple Pay based on iOS can also bring more security to consumers remains to be seen.

Another opportunity for Apple Pay in China is cross-border e-commerce payments. Compared with local mobile payments in China, Apple Pay has a higher penetration rate around the world, especially in Europe and the United States, which are also the main target areas for China's cross-border e-commerce.

If Apple Pay can provide Chinese consumers with fast, convenient and more secure services, it may be able to gain a foothold in China's mobile payment market.

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