Samsung has introduced Samsung Pay in China, making China the third market of its mobile payments service, after the US and South Korea. The service enables Samsung users in China to make in-store purchases instead of swiping or tapping a bank card on a point-of-sale (POS) terminal.
At launch, Samsung Pay users in China can manage their debit or credit cards on eligible Samsung mobile devices including Samsung Galaxy S7, Galaxy S7 edge, Galaxy S6 edge+ and Galaxy Note5. Three layers protections are provided by Samsung Pay: fingerprint authentication, tokenisation and KNOX. Thanks to a proprietary technology, Magnetic Secure Transmission (MST), Samsung Pay can be used on both QuickPass POS terminals with NFC and older POS terminals without NFC technology.
In China, working in partnership with the state-run bank-card processor China UnionPay, Samsung currently supports debit or credit cards from nine financial institutions including China CITIC Bank, China Construction Bank, China Everbright Bank, China Guangfa Bank, China Minsheng Banking, China Merchants Bank, Hua Xia Bank, Industrial and Commercial Bank of China and Ping An Bank.
Why Samsung Pay chose China?
Currently, Apple Pay is available in five countries: the US, the UK, Canada, Australia and China. Google Wallet launched in the US and is planning its official entry into the UK in the next few months. Samsung will now be available in the USA and China. As with Apple and Google’s mobile payments services, Samsung Pay works with NFC terminals. However, unlike the other services, Samsung Pay is also compatible with existing magnetic stripe readers.
In China, like the USA, swipe cards are still a popular payment method. Therefore Samsung Pay’s technology will compatible with existing card readers, rather than requiring installation of new contactless NFC card readers. This provides Samsung a unique selling point as well as wider availability and adoption among its users.
In terms of scale, Apple still ranks first in the global market place, but from the aspect of compatibility, Samsung will be more competitive in China than other countries where NFC contactless is a dominant payment method. Although Samsung Pay is regarded as the late starter in China, it is a strategic step to gain a foothold in the mobile payments space.
Samsung Pay is adding value to its ecosystem, but also facing strong competition with China domestic mobile payments services: WeChat and Alipay
Samsung mobile payments service is currently only available to the advanced range of Samsung models. This will drive Samsung users to upgrade from mid-range models to access the service, hence adding value to Samsung’s ecosystem. Although Apple Pay and Huawei Pay have already launched in China, there is no direct competition in the short term, with each brands’ service only targeting its own customers, as opposed to inter-brand functionality. However, the domestic mobile payments services offered by WeChat and Alipay will be strong rivals.
Samsung’s cooperation with card-processor China UnionPay was an important step to extend the acceptance and provide convenient mobile payments service to its users. But it’s just the beginning of entering into the competition with WeChat and Alipay. There are about 650million active users on WeChat and 400million active users of Alipay. In contrast, Samsung has relatively small active smartphones, and not all of them are currently compatible with Samsung Pay. Unlike Samsung or Apple’s offerings, WeChat and Alipay payments services are app-based platforms, and available for various operating systems including: iOS, Android, Windows, Symbian and Blackberry.
In addition, the huge size of the WeChat user base is due to its convenience that comes along with the payments service such as: taxi booking, energy bill payment, in-app shopping, P2P payment transactions, coupon and chat-bot services. All of those features are increasingly attracting customers and improving mobile payment experience. Meanwhile, as Alipay was developed under the biggest online shopping platform in China, Alibaba, it offers an integrated online and in-store shopping payments service as well as a private financial management function to assist customers and online shop owners with better e-payments experiences.
To compete in the Chinese market, Samsung needs to capitalize on its strong brand image, and utilize the value of the brand to seek partnerships and cooperation opportunities with Chinese organizations. Samsung’s main challenge in the near future will be drawing users towards its platform over universal platforms such as Alipay and WeChat. It will need to ensure it offers all the features its competitors do, as well something unique or greater convenience.