Samsung Pay hits China five weeks after Apple launches mobile wallet app on mainland

Both expected to struggle to compete with Alibaba’s Alipay and Tencent’s WeChat Wallet, which are ‘OS-agnostic’ and work with all smartphones

PUBLISHED : Tuesday, 29 March, 2016, 5:39pm
UPDATED : Tuesday, 29 March, 2016, 5:46pm

Samsung launched its mobile wallet service in China today in co-operation with UnionPay, the country’s only domestic bank card organisation, five weeks after rival Apple launched Apple Pay on the mainland.

This now allows users of Samsung’s Galaxy S series of smartphones to link their bank or credit cards to their mobile wallet so they can use their device to make payments in-store.

All that is required is for the phone to be held near a UnionPay payment terminal, after which the transaction must be authenticated with a fingerprint scan, also using their handset.

Samsung said earlier that its mobile payments service could potentially be accepted at 30 million merchants worldwide. Its near-universal acceptance is possible because of Samsung Pay’s ability to work with magnetic secure transmission technology, which allows merchants to process transactions wirelessly via electronic signals even if the payment terminal is not equipped with near-field communication (NFC) capabilities.

But Samsung may still face an uphill struggle in attracting users, especially as the company is facing slowing demand for its handsets. Although it was ranked the top smartphone brand in 2012 and 2013, the company failed to make the top five in China last year.

Chinese smartphone maker Xiaomi led the pack last year, Apple was No 2 and Samsung No 6, according to market research firm IDC.

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“Samsung’s Android-based products are being squeezed at the high-end from Apple’s iPhone, and from the mid- and lower-end by Chinese brands such as Xiaomi and Huawei,” said Michael Yeo, a senior market analyst at research firm IDC.

As Samsung Pay is only supported by the latest Samsung Galaxy S devices, this also puts a bottleneck on the number of transactions that can be processed through its payments system, said Yeo.

Handsets that are currently supported include the Galaxy S7 edge, Galaxy S7, Galaxy S6 edge+ and Galaxy Note 5.

Samsung said it has partnered with nine Chinese banks, including China Construction Bank and China CITIC Bank, to allow users to link their cards to the payments service. More banks will soon be supported by Samsung Pay, according to the company.

In the meantime, China’s demand for Apple handsets is still high, with consumers placing 3.4 million pre-orders for Apple’s latest iPhone SE which is slated to go on sale on Thursday, according to CNBC. The four-inch iPhone SE will also be compatible with Apple Pay.

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Both Apple and Samsung face more of a threat from Alibaba-backed Alipay and Tencent’s Tenpay, the dominant players in China’s mobile payments industry.

Alipay and Tenpay, the mobile payments system behind the mobile wallet function of popular messaging app WeChat, together controlled about 70 per cent of the Chinese market for mobile payments in 2015, according to Marbridge Consulting.

“Success for both Samsung and Apple’s efforts will probably not be on the same scale and numbers as Alipay and WeChat Wallet ... [which are] OS-agnostic and work with any brand of smartphone,” said Yeo.

“[In contrast], Apple Pay and Samsung Pay are mainly for retail-based payments at stores [which] limits the potential for use to only users who have a Samsung or Apple phone,” he added.