Apple Pay Seeks Growth in Asia, Europe After Slow U.S. Adoption

  • New markets for 2016: China, Hong Kong, Singapore and Spain
  • Apple to compete with established services at banks, Web firms
Photographer: Bryan Thomas/Getty Images

Apple Pay is looking overseas in 2016.

QuickTake My Phone Is My Wallet

After a sluggish start in the U.S. since its debut more than a year ago, Apple Pay is ramping up in markets where people are more comfortable with so- called contactless payments. The service, which lets consumers pay in an app or by tapping their iPhone on store terminals, will be introduced next year in China, Hong Kong, Singapore and Spain.

Apple is counting on its brand recognition as it enters markets that are further along than the U.S. in all things mobile payments, particularly in advanced technologies needed to accept them in retail outlets. Still, it won’t be easy. The iPhone maker will compete with local banks and Internet companies that already offer the service -- not to mention Samsung Electronics Co., the world’s leader in smartphones.

“There’s a lot of opportunity for Apple because their brand has a significant cache,” said Thad Peterson, a senior analyst at Aite Group. Apple’s challenge will be “to see if there’s going to be an adoption curve significant enough to justify the investment.”

Slow Start

The mobile-payment service, which only works with Apple devices, is a way for the company to make products more appealing and spur customer loyalty. After Chief Executive Officer Tim Cook called 2015 the “year of Apple Pay” in January, the service has been slow to take off domestically, partly because of a lack of promotion and a limited number of store terminals able to accept it.

Adoption has been faster in the U.K., where Apple Pay was introduced in the summer. That’s partly because of agreements with merchants such as sandwich chain Pret A Manger and Twickenham Stadium that let customers use Apple Pay to ring up unlimited amounts in transactions. Also, Apple’s operating system, iOS, commands a strong market share, with 39.5 percent of smartphone sales in Great Britain in the three months ended in October, according to Kantar Worldpanel ComTech:

Here’s a look at where Apple is expanding in a few markets abroad:

  • China

Apple said its service will be rolled out as soon as early 2016. More than 235 million people ages 15 and over in China don’t have bank accounts, according to McKinsey & Co., making mobile payments a necessary means to send and receive money. Last week, Apple teamed up with Chinese bank-card association UnionPay, which will make Apple’s market entry “a lot easier,” said James Wester, an analyst at researcher IDC.

Besides UnionPay, 15 banks, including the Bank of China, Bank of Shanghai and Bank of Guangzhou, have signed on to support Apple Pay, Eddy Cue, Apple’s senior vice president of Internet Software and Services, said last week. “China is an extremely important market for Apple,” he said.

Still, Apple Pay will compete with services like Tencent Holdings Ltd.’s WeChat and Alibaba Group Holding Ltd.’s Alipay that control more than 75 percent of the mobile-payments market, according to Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia. And Apple should be prepared to race with Samsung, which also announced a partnership with UnionPay and plans to bring Samsung Pay to China as soon as early 2016.

  • Hong Kong and Singapore

Apple Pay will be available to eligible American Express users in both regions next year, Apple said in October. Companies like Hong Kong Telecommunications and HSBC already let consumers in Hong Kong pay with mobile phones in stores. In Singapore, a consortium of mobile operators, banks and service providers has been working on enabling contactless payments in shops, restaurants and taxis for at least three years. But Apple is increasing its presence in the country, and recently announced it will open its first retail store in Singapore.

  • Australia and Canada

Some American Express users in these countries gained access to Apple Pay this fall. To expand the service’s use, Apple must get cooperation from local banks, which have long offered their own mobile-payment apps in Apple’s App Store. Commonwealth Bank of Australia, for example, has let iPhone users pay for things using its own app for almost two years. On that app, which doesn’t use Apple Pay, customers can store loyalty cards, transfer money to family and friends, send money overseas and even withdraw cash from an ATM.

“There’s little to no incentive for the major Australian banks to let Apple both utilize their merchant-deployed infrastructure or be cut into transaction fees,” said Foad Fadaghi, managing director at telecom consulting firm Telsyte in Sydney.  

  • Spain

Apple’s market share of smartphone sales in the three months ended in October was small, and banks such as Banco Bilbao Vizcaya Argentaria SA have already put out their own wallets for both Android devices and iPhones. However, like in the rest of Europe, merchants began accepting chip-based cards years ago -- while the U.S. only mandated them this year -- and more of their terminals are ready to accept Apple Pay. Apple’s service will be available at some point next year to some American Express users.

Apple declined to provide fresh comments for this story.

Watch Next: Apple Pay, UnionPay Said to Reach Deal in China

Apple Pay, UnionPay Said to Reach Deal in China
Before it's here, it's on the Bloomberg Terminal. LEARN MORE