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In recent years, the world’s largest smartphone maker, Samsung Electronics has struggled considerably in China. In a move to expand its presence in the country, Samsung has made an agreement with the financial-services affiliate of Alibaba Group Holding Ltd. to cooperate on mobile payments. In a statement made by the companies, it was asserted that Samsung Pay, the company’s mobile payment service will be working with Alipay, which belongs to Alibaba affiliate Ant Financial Services Group. The number of active registered users of Alipay are approximately 450 million. A financing round was recently completed by Ant Financial worth $4.5 billion, which brings the value of the privately held firm to about $60 billion.
Samsung Pay has been touted by the South Korean giant as a selling point for its premium smartphones and a tie-up with Alipay would provide a wider reach to its service in a market where the company is desperate to reverse its fortunes in. In recent years, Samsung’s performance in China has declined. For years, the company was the number one smartphone player in China, but it has not stumbled down to the sixth position as domestic handset makers including Xiaomi Corp and Huawei Technologies Co. and others overtook it.
Alibaba’s priority is to expand its business overseas and working with the largest smartphone maker in the world could help it in doing exactly that. Alipay was launched in Europe in the previous month and earlier this year, a deal was also signed by Alipay with Uber Technologies Inc. for enabling Chinese users to make use of Alipay to pay for rides with Uber when they are traveling outside of mainland China. Approximately 58% of all online payments in China are handled by Alipay. This underscores the uphill battle that Samsung will have to face as competition for mobile payments is on the rise in the biggest smartphone market of the world.
Online payment systems on smartphones are used by nearly 358 million Chinese users. The second largest market share in China in mobile payments is held by WeChat Pay of Tencent Holdings Ltd. It is followed by other payment systems that are also attempting to gain traction in the country such as Apple Pay that was introduced in February and Huawei Pay, launched by Chinese firm Huawei, which is a major rival for the South Korean smartphone maker. Samsung had begun adding its payment service on its premium smartphones last year and it added support for China in March this year in conjunction with the country’s dominant card issuer, UnionPay, which is operated by the state.
While online transactions are mostly settled by Alipay, it is being accepted increasingly by brick-and-mortar restaurants and retail stores all over China. With Samsung Pay, users of the firm’s smartphones can upload their credit card information and use the service to make payments at cash registers that are equipped with traditional magnetic-stripe machines or with the next generation near-field technology. It is yet to be seen how the services will work together.