No sale for Apple Pay support in China.... yet

Talks between Apple and UnionPay, which has issued 4.5 billion credit and debit cards, haven't brought Apple Pay support. There may be two issues holding things up.
Written by Kevin Tofel, Contributor on

It's no secret that China is a big part of Apple's growth strategy. It's going to take a little longer for the company to reap the financial rewards of consumers in that country using Apple Pay for purchases, however.

That's because in the latest version of iOS -- 8.3, which was released just last week -- doesn't yet include support for UnionPay cards; the sole company that handles interbank transactions in China, according to MarketWatch.

An unnamed UnionPay employee told the media outlet that talks between Apple and the financial institution haven't yet spawned an agreement for Apple Pay support, even though discussions have been reportedly ongoing for months. Indeed, a beta version of iOS 8.3 for developers reportedly included support for UnionPay transactions through Apple Pay. And Apple itself in November actually announced support for App Store customers using UnionPay, which account for 4.5 billion debit and credit cards.

So what's the issue here? There may be two of them.

One appears to be a China central bank rule that requires electronic payment systems to comply with a technical standard called PBOC 3.0, says MarketWatch. The second may be around the 0.15 percent of every Apple Pay transaction that goes to Apple. That's reportedly too high for the China banks to accept.

If that is the situation, the latter issue is likely the bigger challenge for Apple. It shouldn't be that difficult for an updated Apple Pay system to work with a technical standard; particularly when Apple has been in contact with UnionPay over the system since last year.

Instead, Apple's cut of each transaction could become a poker game of sorts. Apple typically has enough clout to get what it wants -- or most of it, anyway -- when it inserts itself into a service transaction. This time around, that could be difficult. Based on the sheer volume of Apple product sales and potential Apple Pay transactions in the world's most populous nation, China's banking system may have the bigger hand. It may wait to see if Apple folds and reduces that 0.15 percent for Apple Pay.

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