Huawei Technologies, China’s largest smartphone maker by shipments, is boosting its mobile payments service in China, which is likely to make life difficult for Apple Inc’s Apple pay, which was recently launched in the world’s largest smartphone market.
Huawei Pay to Compete With Alipay and WeChat
The Chinese smartphone vendor has collaborated with the state-owned bank card processor China UnionPay Co, to expand its online payments service called Huawei Pay. In September 2015, the company launched its mobile payment app. However, since then, it was undergoing testing phase with availability at the limited number of restaurants and shops. “But now the testing phase is over,” the Chinese smartphone giant said. Huawei indicated that it will join hands with China UnionPay, to further expand its payment app to a number of new Chinese cities.
China UnionPay, which holds monopoly on bank card payments in the world’s second largest economy, is also working with Apple on promoting its payment service in China, which was launched last month.
Huawei’s latest move to expand Huawei Pay is likely to heat up competition even further in the country’s mobile payment market. China’s mobile-payment market is dominated by the likes of Alipay, Alibaba Group’s online payment app and WeChat Wallet, Tencent Holdings online payment platform. At the end of the third quarter of fiscal year 2015 (3QFY15), Alipay held 70% of China’s mobile payment market followed by Tencent’s WeChat, which grabbed nearly 19% of the electronic payment market, according to iResearch.
The Chinese online payment market is getting crowded with both leading foreign and domestic players competing fiercely to grab a greater slice of the market. Samsung Electronics is also planning to launch its mobile payment app, Samsung Pay in Hong Kong and China. However, the specific date is yet to be disclosed by the South Korean company. Reports indicate that the South Korean smartphone vendor is likely to launch its service this year.
According to the company, Huawei’s smartphone holders equipped with a fingerprint sensor along with near-field communication (NFC), a data transmission technology, would be able to download Huawei Pay app and can avail the services. Each and every online payment made through Huawei Pay will be required to undergo a fingerprint scan to further ensure transaction security, said the Chinese smartphone vendor. Some of the company’s smartphones are equipped with NFC and the number is likely to increase in the future.
Competition in China’s mobile payment market is intensifying and major technology companies are locked in a ferocious battle to establish a solid position in the country’s fast growing online mobile payment market. For new entrants such as Apple Pay, the pathway to securing a solid position is extremely difficult, as it faces strong local competition.
According to iResearch, China’s mobile-payment transactions climbed up 64% year-over-year (YoY) in 3QFY15 to $373.2 billion (2.42 trillion yuan). According to the data released by stated-owned China Internet Network Information Center, China has 620 million mobile Internet users at present, which is expected to increase at a growing rate this year. Likewise, the research firm also identified that the number of Chinese residents using their mobiles to make payments also increased 60% to 357 million in 2015.
In China, people use Alipay to pay for several on-demand services such as booking movie tickets, flights, taxi and more. Similarly, users use Tencent’s WeChat mobile wallet, which has around 700 million active customers, to order food, pay bills, and even invest in financial services. These mobile-payment apps have a solid user base, and it will be quite a test for Huawei to attract customers to its app.
Huawei’s Strong Global Presence
Similarly, Huawei could also face stiff competition from its other two domestic arch rivals, as it looks to expand in the country. However, as Internet in the country reaches rural areas, the number of Chinese residents using mobile-payments will probably increase. Thus, there will be enough growth opportunity for the leading Chinese smartphone vendor to work with.
In recent years, Huawei has been successful in expanding its presence as a leading smartphone vendor not only in China but in global market as well. Last year, it sold more than 100 million smartphones, with most of its sales coming from foreign markets. Despite a slowdown in China’s smartphone market, Huawei’s growth in the sector shows its ability to strive in deteriorating conditions and compete in a highly competitive market.
In China, the company was the largest smartphone vendor in 4QFY15, with a 15.2% market share. American tech giant, Apple came in second with 14.6% market share, followed by the local smartphone vendor Xiaomi Inc with a 14.4% market share. Apple’s growth rate in China also deteriorated amid a slowdown in the Chinese smartphone market while Xiaomi missed its annual smartphone shipments for 2015 by 10%. The Chinese smartphone vendor termed it a “low blow” for the company.
Moreover, Huawei was the third largest smartphone vendor in the global smartphone market, with an 8.1% market share in FQFY15, behind Samsung and Apple, according to the data released by International Data Corporation (IDC). Analysts also expect Huawei to lead the global smartphone market in 2016 as well. China’s smartphone market, once dominated by foreign suppliers such as Apple and Samsung, is becoming a more domestically oriented market, with the homegrown mobile makers rising swiftly to the top. Apple, which has already lost its smartphone share to Huawei in China, should also consider Huawei Pay a direct threat to its mobile payment service..
Growth Potential for Huawei
According to Huawei’s representatives, there is still enough potential to grow in the Chinese market. The mobile-payment market is growing rapidly and is expected to grow even further with the increasing number of people accessing the Internet. Currently, the mobile payment app will only be available to Huawei users in China; however, it is expected that the app will soon be launched overseas if there are potential growth opportunities in the global market, the company said.
Source: China Business News