Apple Accepts UnionPay: A Huge Step for Their Ecosystem in China

Apple has just announced they have added UnionPay support as a payment option for customers in China for purchases in the iTunes App Store. This is a big deal. There are dynamics at play with regard to the China commerce market and particularly around e-commerce trends I will get into for our subscribers when I do a global e-commerce update before the end of the year. Several years ago, I began studying why there were so many jailbroken iPhones in China. It turns out apps were the answer. To use Apple’s app store, even to download free apps, you have to have a supported payment method like a credit card. While Apple in China accepts many global credit cards, there is a card they did not accept and it is by far the most dominant offline payment card method in China — UnionPay.

From Apple’s press release, Eddy Cue offered the following statement:

“The ability to buy apps and make purchases using UnionPay cards has been one of the most requested features from our customers in China,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “China is already our second largest market for app downloads, and now we’re providing users with an incredibly convenient way to purchase their favorite apps with just one-tap.”

UnionPay is so dominant an offline payment method in China it is common knowledge to global retailers that, to attract Chinese consumers, accepting UnionPay is essential. This move opens the door to Apple’s ecosystem in China in ways that were a huge roadblock in the past. Even though Apple has a significant number of extremely high end users in China and who are likely have a credit card there is, thanks to the secondhand market, probably upwards of 50m or more users who are more likely to have a UnionPay debit or credit card over anything else. I strongly believe there was a significant number of iPhone users in China who were not investing in Apple’s software or services ecosystem for this very reason.

UnionPay is also a member of the EMVCo which means the foundation for ApplePay in China is currently being laid.

There is always the question of how much software the Chinese actually pay for. We know from Xiaomi’s ecosystem their revenue comes from hardware not software and, in all likelihood, their software revenue-per-user is less than $10. However, Apple has an entirely different kind of customer base than Xiaomi — one that does and can spend. For them, UnionPay opens the door for Apple to generate more revenue from apps and services in the greater China region. This is also a boon for developers who now have a viable way to monetize their apps in China as well.

The big question will still remain around AliPay. Remember that AliPay is the leader in e-commerce in China where UnionPay is the dominant offline purchase method. The three largest online payment methods are AliPay, Tenpay, and UnionPay in that order. AliPay is likely next on Apple’s list as doing so aligns nicely with Apple’s focus and execution in China.

Overall this is another key step for Apple and their ecosystem in China. Hopefully over the next few quarters we will get data to help us quantify the impact of this deal.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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