Xiao Mi's MI pay joins China's mobile payment battle

Written by Felix Yang || August 30 2016

Xiaomi, the well-known Chinese technology focused electronics company, has announced the launch of its payment services “MI Pay”, which is in cooperation with China Union Pay, the biggest Bankcard Association in China. The official launch date is September 1st. After Apply pay, Samsung Pay, Xiaomi is yet another mobile company joining the competition with Alipay in the third-party payment industry in China.

The primary functions of MI pay are similar to Apple pay. Based on NFC technology, customers using MI pay can simplify the payment process with tap-and-go payment, as if there was a bankcard inside the phone. It proves what Xiaomi has always said during its mobile phone campaign: “The mobile phone is a bankcard too.”

Compared with Alipay and Wechat pay, which dominate China's mobile payment industry, MI pay’s process seems to be more straightforward and has transport card functionality to use the payment platform for paying bus and metro fees. MI pay has already connected with transportation systems in Shanghai, Shenzhen and several other first-tier cities in China. Now Xiaomi can also claim: 'The mobile phone is also a bus and tube card.' This is also an improvement comparing with Apple Pay, which is only usable in stores. 

However, those advantages do not promise MI pay will be a success. Apple Pay, which also cooperates with China Union Pay, has not taken a significant market share since its launch in February this year. The main reason is that Alipay and Wechat pay have already built up a huge base of loyal Chinese consumers. As they have demonstrated, to create customer stickiness, companies have to develop payment scenarios where customers will use the payment system on a regular basis, and that takes time. For example, Alipay is based on online shopping platform Tmall and Taobao. Wechat pay relies on WeChat, Tencent's incredibly popular chat app. Although being able to function as a transport card may push Mi pay's daily usage, the range may still not be big enough.

The current size and future potential of China's mobile payment market is enormous. During the first quarter this year, the total mobile payment exceeded RMB5.97 trillion ($918.5 billion). Also, it can be a start for non-financial companies to enter the financial market too. So it is not a surprise as Xiaomi developed its mobile payment app. It has also invested in other areas in financial industries such as banking and insurance. But the same as MI pay, Xiaomi will need to continue to innovate to be successful in this highly competitive space.