It is just over 10 years since the iPhone was first released: the brand celebrated its anniversary last week. However, it wasn’t until the end of 2009 that it went on sale in China, where it quickly became a status symbol. But more recently the iPhone has seen some of its China allure dissipate.
Chinese sales of iPhones have floundered in the past couple of years (see WiC340), and Apple has tried to find new revenue streams to compensate for the slowdown. Mobile payments is one of the avenues it has explored, though not with much success.
The American firm extended its Apple Pay system to China in 2016 but the it has so far failed to take hold (see WiC356). In part that’s because Apple was late to the game and faced a challenge unlike that in any of its other markets: the ubiquity of WeChat Pay and Alipay, two competing services run by local tech giants Tencent and Alibaba respectively. Both can be used on any smartphone platform while Apple Pay is limited to only Apple’s iOS customers.
Apple’s narrower reach is a possible reason why it has been excluded from the launch of the Beijing Metro’s new mobile payment system, which came into effect last month. The new scheme requires users to download an app which functions as a virtual train pass. Users then add value to the digital card and, using Near Field Communication (NFC) technology, swipe their phones at the station turnstiles.
The catch for Apple? The app is only available on the Android operating systems (OS). That may make sense since the majority of smartphones in China run on Apple rival Android.
But TMT Post reckons Beijing’s subway operator might have purposefully excluded Apple from the system, in response to Apple imposing a “tithe” on China’s most popular messaging app, WeChat.
In April WeChat fought back and announced it was going to stop iOS users paying “tips” through its social media app because Apple had started to demand a 30% share of the value donated (see WiC364). Tips are still payable on Android-based smartphones.
Apple later doubled down on this demand, changing its app rules to specifically include regulations for tips and its take of any such payments (WeChat users pay tips to reward online content they like). TMT Post speculates that the state-run Beijing underground isn’t keen to subject itself to the same 30% charge levied on all apps on Apple’s iOS which process payments.
China Daily has a different explanation: “At present, iPhones are not compatible with [the relevant] technology in China.” Not entirely true: the latest iPhones have NFC compatible technology, but it is Apple’s policies that are obstructive. Apple only allows its NFC chips to be activated for Apple Pay services.
Although exclusion from the subway’s new payment system (which at this point is being trialled on Beijing’s Fangshan line) is only a minor blow to Apple, it could be a sign of costlier missed opportunities to come.
The Beijing News takes a rather apocalyptic view: “The inability to use iPhones with Beijing Subway’s Mobile Transport Card system is a fissure between Apple and the present day. Provided that it is not properly addressed, it will become a larger crack that is harder to fill, and could eventually lead to collapse.”
However, a recent document from the Cupertino-based firm suggested that its forthcoming iOS 11 would open up its platform to third party applications, allowing models later than the iPhone 6 to make greater use of embedded NFC technology. This could allow apps to be developed that not only pay for public transport but have a wide range of other potential uses.
Li Chao, an analyst at iResearch, a consultancy, is bullish on the future of NFC usage, which has lagged in China (QR codes have proven more popular as a means of payment thanks to Alipay and WeChat Pay using them).
“The popularisation of NFC is more difficult but NFC has advantages in security and a variety of situations, which means there is large potential for its development in the future,” Li told the Global Times.
© ChinTell Ltd. All rights reserved.
Brought to you by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.