China's homegrown Xiaomi launches its own Mobile Payments platform

Written by Mei-Lan Yang || May 02 2016

The long expected payment system of smartphone producer Xiaomi has finally entered the market. By cooperating with China’s dominant card-payment processor China UnionPay, users can now make purchases by using their phone and Xiaomi Pay through China UnionPays’ Quickpass system. The company’s latest offering comes as the third-party mobile payment market continues to grow tremendously. According to research firm Analysys Mason, the market valuation was set at 16 trillion yuan in 2015. This has attracted not only Chinese companies such as Huawei and Xiaomi, but foreign companies, as well.

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Unlike China’s other well-known payment services, such as Wechat Pay and Alipay, Quickpass uses Near Field Communication (NFC) Technology. A transaction can be initiated simply by holding the mobile device against the NFC reading area at a compatible point-of-sale (POS) terminal.

What is the success rate of these upcoming payment products? Will Quickpass be able to compete with other Chinese mobile payment Giants, such as Alipay and Wechat Pay, which have already established their presence in the field? Many users might find paying for products with other electronic wallets to be more user-friendly than using NFC technology and seem to really have adopted QR codes from Wechat and Alipay.  This could be a key point to take into account when evaluating the future success of these mobile company-linked payment systems.

Even though China’s market is strongly dominated by giants like Alibaba and Tencent, foreign companies are trying to gain a share of the profits as well. In line with China’s Xiaomi, Apple and Samsung also recently sealed a deal with China UnionPay in order to launch their Apple Pay and Samsung Pay products.  For traditional payment methods like debit and credit cards, which were used more frequently before, these new alternative methods will challenge their marketshare.

It is also important to note that Xiaomi, Samsung, and Apple’s strategy of partnering with UnionPay is quite different from how Alibaba’s mobile payment service is offered. By partnering with state-owned China UnionPay, Xiaomi hopes to benefit from its existing relationships with its credit and debit cardholders - nearly everyone in China has a UnionPay enabled card, but not everyone has an Alipay account. Will Xiaomi be able to leverage this to its advantage?