Apple teams up with Tencent in China (AAPL)

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THE MICROPAYMENTS REPORT: Problems and solutions for low-value payments

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WeChat Pay, China’s second most popular mobile wallet, is now a valid payment option in Apple’s mainland China App and Music Stores, according toBank Innovation.

Tencent’s offering will be available to iPhone users running iOS 10 or 11. For context, Apple partnered with Alipay, China’s largest mobile wallet, for the same functionality late last year.

For Apple, these partnerships are an acknowledgment of the status quo in China.

• Mobile payments are massive.Last year, the Chinese mobile payments market was worth $8.8 trillion, according toiResearch. Consumers pay on their phones for everything, including in-store purchases, digital commerce, the service economy, and more.
• And to take advantage, tech companies need to embrace the biggest players.Together, Alipay and WeChat Pay hold a combined 91% of the Chinese mobile payments market. But for a long time, Alipay was the clear leader, with WeChat a distant second. Now, WeChat is catching up, holding 37% of the market. Apple’s new partnership represents an acknowledgment of the shift, as well as an interest in accessing that wide consumer base.

The move could help Apple, but it’s not going to solve the firm’s biggest China problem. Adding Alipay brought Apple a lift — the firm saw a 12% user increase in iCloud and Music after adding Alipay — which will likely extend when WeChat is offered as well. Unfortunately, that lift won’t extend to in-store payments, where Apple’s proprietary wallet holds just 1% of the market and continues to face low adoption, despite reinvigoration efforts like marketing campaigns and discounts. These deals could be a stepping stone to future partnerships that would enable Alipay and WeChat Pay as payment methods in Apple Pay itself down the line, which could substantially help the wallet by limiting fragmentation. But if not, though Apple could see an uptick in services-based purchases, it’s not going to make a dent in its biggest weakness in the market.

BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on mobile payments in China that:

• Forecasts and compares mobile payments volume, in-store mobile payments users, mobile payments volume per capita, and mobile commerce penetration in China and the U.S.
• Overviews the key competitors in China’s mobile payments market, and how new entrants may shuffle the hierarchy of dominant players.
• Uncovers the key drivers propelling China’s mobile payments market.
• Identifies which drivers the U.S. can import from China, and which barriers may be standing in the way.

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