I do, like many of you, appreciate the comforts of the everyday routine, the security of the familiar, the tranquility of repetition, I mean using your iPhone to do everything you can think of in your mind. I enjoy them as much as any bloke. But in the spirit of commemoration, whereby important events of iPhone’s invention, I thought we could mark this “Apple Pay with UnionPay” a day by taking some time out of our daily lives to sit down and have a little chat.
West giants failed is not something new and eBay is the typical example. I think the main reason that eBay failed is because it didn’t recognize that the Chinese market and the business environment are very totally different from that in West. eBay sent a German manager to lead the China operation and brought in a chief technology officer from the United States. Neither one spoke Chinese or understood the local market. It was eBay’s fatal mistake. Moreover, due to the top management team failed to understand the local market, they spent a lot of money doing the wrong things, such as advertising on the Internet in a country where small businesses didn’t even know or use the Internet. eBay had a strong brand in the United States didn’t mean it would be a strong brand in China. Rather than adapt products and services to local customers, eBay stuck to its “global platform,” which again did not fit local customers’ tastes and preferences.
Back to Apple Pay, I think it will experience the same thing. iTunes, apple store, apple music, none of them has a good user experience in China due to long time browsing while opening it. Also, iPhone always appear to be something that stand for a wealthy generation. Compared with Alipay or WePay+WeChat which is more closer and less costly to the ordinary people, apple pay might loose a large percentage of users.
The Chinese market is already ruled by Alipay and WePay+WeChat in such a way, that Apple Pay seems to be hard to be involved although iPhone has been popularized around China. Alipay and WePay enable EFT POS payments for a long time, are incredibly used, and there are hundreds of millions of people using their smartphone apps to pay both in offline and online stores. Alipay is so huge in China, that it is the equivalent to several top US mobile carriers joined together, and Wepay is gradually upcoming.
For WePay, I think that it’s an innovative payment method to Apply because it allows a customer to communicate with the merchant in real-time, as well as to pay in real-time. None of the payment has inserted social medial element into payment product, making it more competitive. It is already used by businesses on a daily basis to pay each other for B2B activities. I know people who use WeChat app for all their daily payment needs, and they hate using their UnionPay card directly.
Although UnionPay may have a big network, however:
- a) Alipay implemented a direct connection to all banks
- b) even though by law everybody has to use UnionPay networks in China, Alipay is so pwoerful that they just didn’t bother to comply with that law and nobody can touch them.
You can understand in this way that the reason why UnionPay works with Apple Pay is to cut alipay’s users into piece, shaping a balanced payment market in China. However, there are problems that is should consider:
1. Customers are easy to say “NO” to new payments.
Credit card and cash work well and the process is quick and seamless. People want their cash-back and/or points. To this point, Apple has an advantage for they are integrating within the existing ecosystem & major credit card companies. PBT created its own wallet, and attempted to get customers to pay through ACH or Discover (the credit card accepted). Merchants love ACH because the fees are much smaller than credit cards. However, this was a big leap for customers. Apple has an advantage, because customers will still get their points. They will be using the same payment method, just in a new, presumably more convenient, way.
The question is: how much more convenient than cash or credit?
In my humble opinion, speed at check out is not a huge pain point. Consumers I spoke with were more frustrated and concerned about the speed of waiting in line, than they were for the time it took them to pay, especially for Chinese users. For this product to be succeed, it will need to be flawless and fast. Customers and cashiers will quickly turn against anything that takes longer than the current method.
2. POS are tricky, non-standard and a lot of them across merchants troubled.
Standardizing the POS to accept new payments across merchants is tough. I learn from a guy working in Braintree who told me that there are about 9 million merchants in the U.S accepting traditional cash and credit payment methods. Apple has some major work to do before it’s available in enough merchant locations to grain critical mass.
However, in China, it is tough to gain traction if customers can only use your product at a handful of stores. Many Chinese customers lose interest if they can’t use the product regularly. The whole selling point of “you don’t need your wallet” disappears when they needed it everywhere else.
And what about loyalty cards?
With PBT this was a big selling point. Because we primarily sold into grocery stores, where loyalty points / coupons are a big deal. How will the Apple & NFC integrate with store specific loyalty systems across merchants?
3. Signing up isn’t the hart thing.
Apple already has about nearly 800 million iTunes accounts with registered cards. Yet, how many of them will take the extra step to use the phone at a store that has NFC for payment, and then continue to use it for their purchases Customers already have the phone. Apple already has the payment data. Yet, again it is difficult to get customers to consistently use a new payment method.
At PBT, many people who signed up didn’t even use the system once, which was surprising considering the registration process took about 5 minutes and required a lot of data. I got to the point where I would physically walk someone over to the cashier and go through the first process with them. Apple products are traditionally easier to use, but still, people are reluctant to take on change, even after signing up for the product.
Getting the system enrolled in enough merchants to make the process a habit, I believe will be the biggest hurdle.
4. Data Security is a huge issue and getting bigger.
Recent security breaches will likely help adoption. Customers are becoming increasingly less willing to provide their credit card data to merchants. PayPal hides payment details from suppliers, and buyers like it that way. Apple will hide payment data from merchants, which can be a selling point.
Security was a big selling point to many customers who signed up for PBT. It is more difficult to steal a fingerprint than other payment methods and in this case they’ll need:
- Your phone
- Your finger
The bigger danger, is the sensors failing in the winter when it is freezing and fingers are too cold to register.
Those 4 points that is out the outside forces challenging Apple Pay, instead, it’s the thing that it should be promoted itself. To be strong self first, then come to the rest.
With giant like Alipay, WePay, and various medium sizes of payments gateway, it’s destined to be a hard war for Apple Pay in China
