Mobile payments

Samsung ties up with Alipay to increase Samsung Pay user base in China

PUBLISHED : Friday, 20 May, 2016, 9:55pm
UPDATED : Tuesday, 11 October, 2016, 1:04pm

Samsung Electronics is teaming up with Alibaba-backed Alipay to allow Samsung Pay users to link their Alipay accounts to the app, as the South Korean giant looks to get more Chinese users on board its mobile payments service.

Samsung launched its Samsung Pay service in China at the end of March, five weeks after rival Apple launched its similar mobile payments service Apple Pay in the country. Samsung Pay allows users to tie their bank or credit cards to the service and use it to make in-store payments.

Both companies are fighting for a slice of the country’s mobile payments market, which is currently dominated by Alipay and Tencent’s Tenpay. Alipay and Tenpay collectively held about 70 per cent of China’s mobile payments market share last year, according to Marbridge Consulting.

Injong Rhee, executive vice-president at Samsung Electronics, said that Samsung will be working with Alipay to “expand Samsung Pay services in China”.

“Alipay covers the vast majority of online payment use cases,” said Fan Zhiming, president of the Payment Business Unit at Ant Financial. “The technology integration … with Samsung Electronics will make the payment process faster and more convenient when users make payments at stores where Alipay is accepted.”

But Michael Yeo, senior market analyst at IDC, said he believes the partnership is not a “game-changer” and is unlikely to expand the number of Samsung Pay users.

“For Samsung users who have one of the Samsung Pay compatible phones, this isn’t a massive departure from what they can already do,” said Yeo. “It just means that the Alipay functionality will be available and quicker to use than if the user had to click into the Alipay app within the phone … maybe one or two swipes quicker.”

The bigger issue at hand for Samsung, which is looking to grow its Samsung Pay user base, is the company’s slowing growth in China, he said.

Samsung’s market share in the Chinese smartphone market fell 12.8 per cent last year, reaching a mere 7.7 per cent, according to market research firm Counterpoint Technology Research.

“Samsung’s … falling market share of phones in China [will] ultimately lead to a lower potential user base which can effectively use Samsung Pay,” Yeo said.

The company, which was the single largest smartphone vendor in China in 2013, has since been edged out by local smartphone makers such as Huawei, Xiaomi, Oppo and Vivo, according to data from market research firm Strategy Analytics.

These four Chinese companies occupied the top four spots in the first quarter of this year, with a collective market share of 52.5 per cent. Apple occupied the fifth place.

Samsung’s shrinking market share and the fact that Samsung Pay is only compatible with its later devices mean the company’s user base is limited to customers who are willing to shell out for a high-end Samsung phone.