UnionPay takes mobile payment services fight to Alibaba and Tencent with integrated app

China UnionPay has created an integrated mobile app that facilitates nearly all mainland banks to expand mobile payment services, spurring a strong fightback against third-party payment services backed by Alibaba Group Holding and Tencent Holdings.

The mainland’s dominant bank card clearing service provider has also launched a nationwide campaign with aggressive discounts to attract shoppers who have been increasingly using Alipay and Tenpay services.

“The QuickPass app, created under the guidance of the central bank, is a unified platform that utilises all resources by commercial banks to offer users access to mobile payment,” UnionPay said in a statement.

The launch of the app reflects UnionPay’s strongest ever efforts to compete against the two internet giants with the battle for mainland consumers’ mobile payments escalating, analysts say.

UnionPay offers both near field communication technology and QR code services on the unified platform.

It announced earlier that the facial recognition technology used in payment was also in the works.

UnionPay said the app could be linked to more than one bank account by different banks with all of their mobile payment services accepted and conducted via the platform.

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Alipay and Tenpay, backed by the internet giants Alibaba and Tencent, have been able to lure customers away from the traditional bank card payment system because of the popularity of their respective online shopping website Taobao and social app WeChat.

Alibaba also owns the South China Morning Post.

According to consultancy Analysys International, China’s third-party payment market had grown to 35.9 trillion yuan (US$5.4 billion) by the middle of 2017, with Alipay taking up the largest share at 39 per cent, followed by Tenpay at 27 per cent and China UnionPay at 17 per cent.

What is worrying UnionPay is the establishment of a of a nationwide clearing house for online payment services platform connected to People’s Bank of China’s payment and clearing system through which all non-bank payment institutions such as Alipay and Tenpay will be required to conduct payment and clearing activities from June 30, 2018.

Currently, Alipay and Tenpay connect users and banks directly, without supervision from the central bank or the need to be routed through China UnionPay.

“Before the digital era, all payments went through the UnionPay system with banks and UnionPay splitting the transaction fees paid by merchants,” Ba Shusong, chief economist at the China Banking Association, said in a report. “But Alipay and Tenpay have bypassed UnionPay, connecting consumers and banks directly.”

As a result, UnionPay has had to find a new role in the digital payments era. The efforts include a partnership with JD.com in August, which recognised Chinabank Payments, the payment app backed by JD. This was the first time UnionPay had given access to an internet company’s third-party payments system.

“In the end it will all come down to each party’s ability to draw users to their own bank-merchant-consumer ecosystem, which in the end is only good for consumers,” said Li Chao, analyst with consultancy iResearch.

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