In the face of rapid changes in the global payment market and the increasing competition from domestic internet payment platforms, Ge Huayong, Chairman of China UnionPay, has consistently emphasized the importance of UnionPay's international expansion and product innovation over the past six months. "Mobile payment is widely recognized as the future of the industry," he said. "However, there is currently no dominant mobile payment product or universally accepted business model. This is because various stakeholders are trying to take control of their own ecosystems, lacking cooperation, standardization, and a unified approach to business models."
As a key platform for the banking card industry, China UnionPay aims to become a leading integrated payment service provider by leveraging its platform-based capabilities. Over the past year, Ge has been vocal about UnionPay’s new strategies in both international expansion and digital transformation. This includes partnerships with Apple and Samsung to launch Apple Pay and Samsung Pay in China, as well as offering "Cloud Flash Payment" services in collaboration with more than 20 commercial banks.
Behind these moves lies a highly competitive and evolving payment landscape. In major cities like Beijing and Shenzhen, Alipay and WeChat Pay have rapidly gained traction through QR code payments, even extending into second- and third-tier cities such as Hangzhou and Hefei. These platforms have captured a significant share of consumer transactions, posing a challenge to traditional bank-based payment systems like UnionPay.
At the same time, regulatory developments are reshaping the financial ecosystem. The People's Bank of China recently issued a notice that clarified the rules for electronic accounts, allowing second and third-tier accounts to operate independently of UnionPay standards. This suggests that in the coming years, the central bank may gradually accept QR code payments, potentially disrupting the existing offline card payment system.
UnionPay has also been actively expanding its international presence. Since June 2015, Ge Huayong has repeatedly highlighted the importance of UnionPay's global strategy. By December 2015, UnionPay had signed a memorandum of understanding with the Russian Federal Tourism Administration to enhance its services in the Russian market. In September, he emphasized that UnionPay cards are now accepted in over 150 countries, covering 26 million merchants and 1.9 million ATMs. The goal is to ensure that wherever global tourists go, UnionPay cards are available.
Wang Yonghong, director of the Science and Technology Department at the People's Bank of China, noted that UnionPay has three strategic goals for international development: first, expanding the acceptance of UnionPay cards globally; second, promoting local adoption of UnionPay cards in foreign markets; and third, establishing the UnionPay standard internationally. With the RMB's growing influence and the implementation of the "Belt and Road" initiative, UnionPay is playing a key role in China's broader financial globalization strategy.
Despite these efforts, UnionPay faces challenges in the domestic market. The rise of QR code payments has significantly impacted traditional card swiping methods. While UnionPay developed the two-dimensional code technology in its labs, it was not initially approved for widespread use. However, Alipay and WeChat Pay quickly capitalized on this gap, launching aggressive marketing campaigns and capturing a large user base.
According to data from Analysys Think Tank, in Q3 2015, the third-party mobile payment market reached 439.14 billion yuan, with Alipay holding 71.51% of the market and WeChat Pay at 15.99%. UnionPay's share was only 0.49%. In response, UnionPay partnered with 23 banks to launch "Cloud Flash Pay," a mobile payment solution that allows users to make contactless payments using NFC-enabled smartphones without needing to present a physical card.
While UnionPay emphasizes security and convenience, the adoption of Cloud Flash Pay remains limited due to low NFC terminal penetration and a lack of merchant support. As of now, only 3 million out of 10 million UnionPay POS terminals support flash payment. The company is working to integrate more scenarios and expand its partnerships, including with Apple and Samsung, to promote its mobile payment solutions.
However, some industry insiders remain skeptical about the long-term success of Apple Pay in China. They believe that the market will ultimately be dominated by Alipay and WeChat Pay, which have strong user bases and deep merchant networks. For many banks, the reliance on third-party platforms has led to a loss of revenue, as they only receive a small percentage of transaction fees.
The debate between the "quartet model" used by UnionPay and the "three-party model" employed by Alipay and WeChat Pay continues. While the quartet model has proven successful globally, the three-party model offers greater convenience, albeit with some security trade-offs. Despite this, traditional card-based payments still hold significant value, with global card transaction volumes expected to reach $22.4 trillion in 2015, showing continued growth.
Looking ahead, UnionPay is investing heavily in mobile and cross-border payment solutions, aiming to build a global brand and enhance its digital offerings. While challenges remain, the company remains committed to adapting to the evolving payment landscape and maintaining its position as a key player in the industry.
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