The potential partnership between Apple and Chinese ecommerce giant Alibaba could facilitate a far more rapid rollout of Apple Pay in the country than if Apple goes it alone, suggests a piece in the WSJ. Tim Cook first revealed that he was in talks with the company at the WSJ Digital conference last month.
One possible scenario is for Alibaba’s financial affiliate, which owns the Alipay electronic-payment business in China, to provide back-end services for Apple’s Apple Pay payment system, allowing iPhone users to pay with Apple Pay using the money from their Alipay accounts, Mr. Tsai said.
Such an arrangement would be significant for two reasons …
First, Alibaba is the key player in online shopping in China, with a market share estimated at around 80%. Any partnership with the company would be hugely beneficial to Apple, especially if Alibaba customers can continue to use their existing accounts – providing a painless way to transition to Apple Pay.
Working with Alipay in China could give the company access to Alipay’s powerful transactions-settling system, which is already used by hundreds of millions of consumers and businesses. It would also let Apple take advantage of Alipay’s existing agreements with more than 200 Chinese financial institutions, which allow users to transfer money from their bank accounts to Alipay accounts.
Second, it potentially offers safe passage through the regulatory minefield Apple would otherwise face in China. Apple has not always enjoyed the most comfortable of relationships with the Chinese government, with the Chinese launch of the iPhone 6 delayed due to regulatory issues, and a phishing attack on iCloud linked to the Chinese government firewall. The Chinese government may be more amenable to a tie-in with a Chinese company than it would with Apple trying to push Apple Pay independently.
Everything we do, we are going to work it here. Apple Pay is on the top of the list.
For Alibaba, too, a partnership with Apple makes sense. While the company dominates online shopping, it is less well established in bricks-and-mortar stores, relying on crude QR code and soundwave payment systems that aren’t widely supported by retailers. A partnership with Apple Pay would provide a fast route to supporting NFC payments in stores.
The mooted partnership is not a done deal, with no official statement yet from Apple, and Alibaba Executive Vice Chairman Joseph Tsai adopting a cautious tone in an interview with the WSJ: “We are positive about the potential cooperation, but it depends on the details being worked out.” It does, however, seem to make perfect sense for both players.
Update: Adding to the likelihood of the agreement, Alibaba founder and CEO Jack Ma discussed the potential Apple partnership with CNBC today:
Ma also suggested that Alipay could one day partner with Apple for a payments system. He indicated that “we’ve had great discussions, and I think both are interested.” The two firms’ partnership could even extend to hardware sales and cloud computing, he suggested.