Why we believe Apple Pay can’t beat Alipay in China

When talking about O2O (Online to Offline), we should keep in mind that the key to the O2O business success lays in the hardware and acceptance support from offline merchants. Eventually, it’s up to merchant’s willingness to accept a new digital payment method or not. Beyond the merchant fee and technology required, the key criteria for a merchant to decide is the user base of a particular payment method.

Apple’s iPhone currently accounts for 30% of China’s mobile phone market. However Apple pay is only available to the new model iphones including the iphone 6 and 6s. If we do the calculation all the way out, Apple pay only covers 10% of China’s mobile phone users, most of which are based in the economically developed cities of China. You might already be disappointed by the potential market size of Apple pay based on the aforementioned calculation. The truth is that the market could be even smaller. “Family accounts” are another issue. Some elder family members do not have an Apple ID, thus they are sharing one account which leads to even smaller potential Apple Pay user numbers. Alipay has no restriction on phones. Any mobile user could have an Alipay account and install Alipay app.

Compared to Ant Finance’s strong business development force who have been tirelessly persuading merchants to accept Alipay, Apple Pay has very little advantage. Apple will have to rely heavily on their partner China UnionPay to help drive acceptance. It might also help if they came up with a teacher to billionaire story which has been ever so helpful to Alipay as the story of Jack Ma along with a massive existing user base convinces merchants to accept Alipay… 

Despite the dim future, we still have faith in the younger generation to use Apple Pay to pay for music or other internet purchases; tips of how to use Apple pay were published extensively on WeChat, China’s most popular social messaging app. It will be a long battle for Apple Pay in China.