China — not the US, not India, not Europe — has become ground zero in the global war for mobile payment dominance.
And now Huawei wants to enter the fray. According to Android News, the company this week announced the launch of its mobile payment service in China, called Huawei Pay.
It will be entering a dog-eat-dog world in which foreign brands are working hard to take a chunk out of the locally dominant companies WeChat and Alipay.
Let’s take a quick glance at the lion’s den Huawei just walked in to.
Apple Pay is finding moderate success, with three million cards being activated in the first two days. But, in order to make the service more palatable for vendors, Apple Pay cut its transaction fee in half to 0.7 per cent per transaction (as compared to o.15 per cent in the US).
Samsung entered the market less than a week after Apple as to not be left behind, globally the service lost US$16.8 million in its first year and the company has been silent on a post-launch update from China.
Alibaba’s Alipay arm is the dominant service. It is valued at US$60 billion and boasts 400 million verified users — which gives it an impressive 70 per cent market share. Also, the company has started to look beyond its home market, with the goal of being adopted by 500,000 overseas stores by the end of the year.
And lest we forget Tencent-owned WeChat’s mobile wallet, with a 19 per cent of the market it falls short of Alipay but potential reach of 650 million people is undeniable. The payment system has become an integral part of WeChat becoming the most important social media tool in China.
Zooming in on Huawei Pay
The product will come pre-installed in new Huawei phones and wearables — an effort to seemingly dissuade people to buy a Huawei device only to upload a service like WeChat.
Huawei’s has only inked the support of its lone local bank, the Bank of China — one of the ‘Big Five’ state-owned banks in China. BOC card holders will be able to integrate Huawei Pay with their accounts.
To put this in perspective, Huawei has a long way to go. While BOC is certainly a large client, Apple Pay can be used through 19 banks and WeChat simply requires a ‘top up’ via a debit card.
What Huawei has in its corner is the popularity of its hardware. In October 2015, the phone company passed Xiaomi as the most popular Chinese mobile brand, so preloading the service onto its phone means a lot of eyes will be seeing the app.
The company became the fourth company after Apple, Samsung and Nokia to ship 108 million phones in a year (albeit a good chunk of those left China) so if the company convince users to actually use the service it does have an almost-instant large market.
Specifics of the service, like the involvement of other banks or the rate of the transaction fee, were not revealed during the press conference.
Chinese media has reported on rumors that Lenovo, Xiaomi and ZTE are developing plans for their own mobile payment systems, but nothing substantial have come from those reports.
The final thing to watch out for is how quickly Huawei considers launching on the international market. Its phones are gaining traction among Western European customers and it has proven to be a key part of the company’s recent success.
Huawei is coming off a banner year in 2015, so if the company is going to take this risk, now is as good a time as any.