Apple's iPhone 6: Opportunity In China

The iPhone 6 is in the final stage of the approval process formulated by China’s Ministry of Industry and Information Technology (or MIIT). The Chinese regulator didn’t provide time frame for the completion of the approval process.

UnionPay is the only domestic bank card organization in China.  Apple AAPL has partnered with UnionPay for launching the Apple Pay service in China. Several UnionPay associated banks and merchants accept contactless payments, and many are willing to adopt the technology once Apple Pay arrives in China This partnership will pay a key role in developing the Apple Pay service in the country.

The opportunity

The volume of mobile payments in China will increase from $197.09 billion last year to $1.95 trillion (11.94 trillion Yuan) in 2017. This will be fuelled by the growth in mobile internet as 81% of Chinese internet users use mobile to access the internet. Mobile internet users in China will grow from 500 million in 2013 to 745 million in 2017.

Xiaomi missed NFC

In July 2014, Xiaomi launched the Mi4 in China to compete with Apple and Samsung (SSNLF). Last month, Xiaomi replaced Samsung as the largest smartphone vendor in China with a market share of 14%. The Chinese smartphone maker dropped the NFC feature in Mi4 as only few users across the globe were using the feature. This gives the iPhone 6 a security advantage over Xiaomi’s Mi4.

Competition

Alipay processes more than two-third of all transactions on the online marketplaces provided by Alibaba BABA. Currently, Alipay has about 79.90% share of the mobile payments market in China. Last year, Alipay handled mobile payments worth $150 billion. Alipay provides e-wallet known as Alipay Wallet with over 100 million registered mobile users. Alipay Wallet includes functions that enable making e-payments via smartphone. The digital wallet is heading towards mobile commerce by allowing merchants and software developers to create online store within the app.

In early September, Alibaba partnered with Huawei to make its payment service AliPay more secure.  Alipay Wallet will be integrated into Huawei’s forthcoming smartphone Mate 7, which will provide chip-level security using biometric security technology. The fingerprint data will be saved and stored on the phone in encrypted form to ensure that only approved third-party apps can access the information for transactions. Currently, there is no information related to the launch date of Mate 7, and it’s pricing.

Recently, AliPay partnered with Nok Nok Labs to enable secure online payments via the fingerprint sensor technology integrated within Samsung Galaxy S5. Alipay customers can make purchases and transfers in Alipay Wallet through their fingerprint.

Tencent (TCEHY)competes with Alipay in the mobile payments industry through Tenpay. Currently, Tenpay has about 8.9% market share of the mobile payments market in China. Tencent intergrated Tenpay with popular messaging app WeChat in November 2012.

Final Thoughts

Apple’s partnership with UnionPay will enable the company to tap the mobile payments market. However, Apple Pay will face stiff competition from local services once Apple gets regulatory approval to launch the service in China.