According to Marbridge Consulting, Alibaba's Alipay mobile payments service has a 70% market share in China while Tencent's Tenpay accounts for around 20%. Recently, Apple and Samsung both announced that their mobile payments systems would be compatible with China Union Pay's 5 billion credit cards by early next year. As both of these companies enter China's mobile payments market, competition in this market, which is currently dominated by Alibaba, will increase. China's search engine company Baidu launched its mobile payment service in 2014 and, despite a strong presence in the mobile search market in China, its wallet service has not made a significant dent in Alipay's market share. Given Alipay's dominance in the Chinese market and the country's preference for local players, we believe Apple and Samsung might not be able to prove as strong competitors to Alibaba in the immediate future.
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Ubiquitous Presence Works In Alipay's Favor
Alipay has more than 350 million registered users in China, and apart from mobile shopping it can used by consumers not only in nearly 40,000 Chinese supermarkets and convenience store outlets, but for taxi services, as well. Street food vendors in China and the wet markets have also tied up with Alipay, making it even more ubiquitous. Alibaba is spreading its wings with the Alipay platform and in May 2014, the company revealed its plans to monetize the public sector by announcing a Future Hospital Plan where it will use its own platform to enable users to register for consultations, monitor queues and conduct payments. The company plans to launch a "service window" on the Alipay wallet, through which consumers will be able to complete the entire process of hospital visit from registration to receiving medical reports. It also added a feature to its Alipay app which will allow users to transfer funds to any other Alipay user. Alibaba is definitely ahead of the game in the mobile payments business in China, making it difficult for other players to upset its position.
While Apple Pay has the advantage of being integrated into the Apple iOS, which results in a streamlined experience for a better checkout speed, the popularity of Apple phones in China seems to be declining. For the period April-June 2015, Apple became the third largest smartphone company in China, losing its topmost position. Samsung with its struggling smartphone business is continuing its losing streak in the China. For both these companies to succeed in the mobile payments space, the popularity of their smartphones will be key. While we believe Apple definitely has an edge over Samsung in this space with the popularity of its iPhones in China, Alipay's dominant position in the Chinese mobile payments market makes it difficult for both companies to prove to be a real challenge to Alibaba.
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