Samsung Electronics’ mobile payment system could see wider adoption in mainland China when it is launched Wednesday

South Korean company’s payment service due to touch down one week after Apple Pay

PUBLISHED : Monday, 22 February, 2016, 4:10pm
UPDATED : Monday, 22 February, 2016, 8:27pm

Samsung Electronics’ mobile payment system could see wider adoption in China than rival service Apple Pay when the former launches on Wednesday.

Apple’s service finally debuted on the mainland last week and made an encouraging start.

“While there will likely be less fanfare involved, we believe that Samsung Pay may be accepted by more merchants [on the mainland] than Apple Pay,” Jefferies equity analyst Johnny Wong Kin-man said in a research note on Monday.

Apple Pay was introduced last Thursday with the backing of 19 Chinese banks and China UnionPay, which supports mobile payment for its hundreds of millions of cardholders and a vast network of merchant partners that use its point-of-sale terminals.

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“Our check of online reviews shows a predominantly positive response to the launch of Apple Pay in China,” Wong said.

“The main reason for the positive feedback relates to the ease of use and how fast a transaction takes place.”

Both Apple and Samsung’s mobile payment systems work with UnionPay’s QuickPass technology, which allows consumers to pay for purchases by simply waving their near-field communications (NFC)-equipped mobile device in front of a QuickPass-enabled payment terminal.

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Samsung has expanded the use of NFC chips in its Galaxy and Note devices, while Apple started adopting NFC with the release of its iPhone 6 models in 2014.

Wong said the support that Samsung Pay could receive from merchants was “due to its magnetic secure transmission technology, which can be used with point-of-sale terminals that do not have NFC capabilities”.

According to Samsung, its Samsung Pay could potentially be accepted at 30 million merchant locations worldwide, making it the only mobile payment solution with near universal acceptance.

“What’s more, Samsung intends to expand its payment capabilities to more mid-end phones in future,” Wong said.

Samsung Pay, first launched in South Korea and the United States last year, is expected to be rolled out in Australia and Singapore this first quarter.

Gartner analyst Sandy Shen has said the rollout of Apple Pay and Samsung Pay will likely see success in large mainland Chinese cities “where consumers are more receptive to new technologies and where there is a larger installed base of contactless point-of-sale terminals”.

China UnionPay currently operates more than five million contactless payment terminals that support NFC-enabled mobile devices.

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“We believe Apple Pay’s encouraging start will give UnionPay more impetus to roll out its merchant network to accommodate more NFC-enabled point-of-sale terminals,” Wong said.

He added that smartphones from China’s Huawei Technologies and Xiaomi also have NFC payment functions supported by UnionPay’s merchant network.

UnionPay must chase rapid expansion to challenge the country’s leading mobile payment systems run by Alibaba Group and Tencent Holdings.

According to Marbridge Consulting, Alipay and Tencent’s Tenpay dominate the mobile payments market on the mainland, with Alipay accounting for 70 per cent of the market.

Wong said the advantage of Alipay and Tenpay, which is the system behind the payment function of mobile-messaging service WeChat — known as Weixin on the mainland — is their use of QR codes for both offline and online payments.

In comparison, UnionPay’s QuickPass technology needs a point-of-sale machine to facilitate the NFC transaction.