UnionPay Flash supports the top-up payment of QCoin, QQ Music, and Tencent Videos. WeChat Mini Programs will gradually support Flash Pay, being in beta test since 22 September.

On October 2nd, Alipay announced the progress in promoting interconnection with China UnionPay. it has opened online payment scenes to the UnionPay Flash app, covering the first batch of 85% Taobao merchants.

For offline, it has also implemented QR code scanning and mutual recognition with UnionPay Flash payment in multiple cities and plans to cover all cities in China by March 2022.

UnionPay, also known as China UnionPay or by its abbreviation, CUP or UPI internationally, is a Chinese financial services corporation headquartered in Shanghai, China. It provides bank card services and a major card scheme in mainland China.

Founded on 26 March 2002, China UnionPay is an association for China’s banking card industry, operating under the approval of the People’s Bank of China (PBOC, central bank of China).

It is also an electronic funds transfer at point of sale (EFTPOS) network, and the only interbank network in China that links all the automatic teller machine (ATMs) of all banks throughout the country.

In 2015, UnionPay overtook Visa and Mastercard in a total amount of value of payment transactions made by customers and became the largest card payment processing organization (debit and credit cards combined) in the world after the two.

China’s 3rd-party payment market 2021-2025e: mobile vs. internet

China’s third-party online payment market had total transactions of over US$820 billion in Q1 2017, led by Alipay (34.7%) and UnionPay, while mobile payment transactions reached US$2,761.78 billion in China, led by Alipay (53.7%) and Tencent Finance.

The total transactions of China’s third-party online payment market were 5,584.831 billion yuan (US$820.03 billion) in the first quarter of 2017 with an increase of 6.96% QoQ.

Alipay continued to lead China’s online payment market with 34.71% market share by the total transaction in Q1 2017, followed by UnionPay (22.44%) and Tencent Finance (15.37%). The top three institutions combined account for 72.52% of China’s online payment market.

The total transactions of China’s third-party mobile payment market reached 18,809.12 billion yuan (US$2,761.78 bn) with an increase of 46.78% QoQ in Q1 2017.

Alipay has 53.7% market share in China’s mobile payment market in Q1 2017 followed by Tencent Finance (39.51%).

Tencent Finance ranks first in terms of the number of active users in Q1 2017 (841.26 million), followed by Alipay (491.98 million) and Baidu Wallet (68.21 million).

1 in 4 China post-90s consumers use Alipay credit service

China Third-party online payment market had a total transaction value of RMB 4.65 trillion in Q2 2016, with an increase of 6.5% QoQ according to Analysis.

Alipay continued to dominate China’s third-party online payment market by total transaction value with 43.39% market share, followed by Tenpay (16.95%) and UnionPay Merchant Services (15.44%).

The total transactions of China’s third-party mobile payment market exceeded RMB 7.5 trillion in Q2 2016, an increase of 25.68% QoQ. The total transactions in the first half of 2016 reached RMB 13.48 trillion.

Alipay led China’s third-party mobile payment market with 55.4% market share, followed by Tenpay (32.1%) and Lakala (4.4%).

China users in 21 to 29 age group from the first-tier and the second-tier cities are the main mobile payment users, accounting for 43%.

On average Chinese outbound travelers spent 17% less per day in a twelve-month period than the previous year – from RMB3,324 (US$508) to RMB2,849 (US$436) according to a survey from Hotels.com.

Top Chinese spenders cut back by 68%, from RMB13,800 (US$2,111) to RMB8,228 (US$1,258). That meant the majority settling on three star rather than more luxurious hotels. However, the survey also indicates the spending is expected to rebound in the next year, with one-third of travelers planning to spend more.

The survey pointed out two biggest challenges facing those providing accommodation to Chinese travelers: a lack of Mandarin-speaking staff and of China UnionPay card facilities.

When planning their next trip, Chinese travelers are particularly taking into account safety, sightseeing, dining and ease of visa applications, with the currency of the intended country not generally a factor.

According to hotel room demand on the Hotels.com China website, the most popular countries for Chinese travelers to visit in the last two years were the USA followed by Thailand. In 2015, Japan overtook Hong
Kong in third spot and Australia climbed from eighth most visited to sixth on the list.

In terms of cities, Hong Kong followed by Bangkok remained the top two from 2014 to 2015. Tokyo climbed from the ninth to fourth most visited city from 2014 to 2015 and Chiang Mai entered the top ten list in 2015.

When it comes to a wish list of countries to visit in the next 12 months, Australia came out number one at 15%. Also high on the intended travel list were Japan, Hong Kong, South Korea and the Maldives.

China male consumers spent more on large purchases than female. 51% paid for over half of their online purchase on mobile end; and, mobile payment for virtual goods consumption increased by 6 percentage points higher in 2015 compared with the previous year according to China UnionPay.

Related: UnionPay Rising on Mobile Payment

54% respondents spent over 1,000 yuan (US$154.35) in shopping online each month and the consumption has been increasing year by year according to China UnionPay. The number of male buyers each of whom spent over 5,000 yuan (US$771.76) online were more than female users with 6 percentage points higher. Shanghai online shoppers spent an average of 2,000 yuan (US$308.70) online each month ranking first in China.

Mobile payment was quite common among China’s consumers. 82% respondents once used mobile phones to complete the payment and 51% paid for over half of their online purchases.

The young generation below 20 years old was interested in payment through the mobile wallet and other apps. Mobile payment for physical offline goods reached 33%. Mobile payment for virtual goods consumption increased by 6 percentage points higher in 2015 compared with the previous year.

Mobile safety became even more crucial this year. About one-eighth encountered network fraud with 6 percentage points higher compared to 2014. Nearly 50% were cheated on social accounts. Major scams were viruses, phishing websites, false base-station smishing (pretending as China Mobile and like). 20% respondents lost more than 2,000 yuan from online scams.

Nearly 90% respondents thought it necessary for mobile payment to equip certain verifications before payment transactions which indicated that security must be the priority for mobile payment. 76% used to verify via mobile phone verification code and the ratio increased by 12 percentage points over 2014.

Nearly 70% used dynamic verification code to protect payment security in each online transaction. About 20% set maximum payment limit of SMS verification reflecting cardholders’ different payment scenarios demand. Given that innovative payment, the willingness to use innovative payment among consumers who encountered scams were 4 percentage points lower than those who didn’t suffer such fraud.

Also read: China E-Payment Insights 2015

Alipay and WeChat Pay are the two most popular mobile payment products in the market in China. Now, UnionPay is making a threat with mobile QuickPass and partnerships with ApplePay and SamsungPay.

China UnionPay and Apple announced a partnership on 18 December 2015 to bring Apple Pay, which transforms mobile payment with an easy, secure and private way to pay, to China. China UnionPay cardholders will be able to easily add their bank cards to Apple Pay on iPhone, Apple Watch and iPad, providing added convenience and security to everyday shopping.

China UnionPay and Samsung on the same day announced the cooperation on Samsung Pay. With Samsung mobile phones, UnionPay cardholders in China will soon be able to enjoy the fast and secure mobile payment service.

Online payment and mobile payment market competition has become more intensified with mobile internet penetrating further and mobile business broadening this year. UnionPay recently launched QuickPass payment collaborating with more than 20 banks in China to deliver safer and more convenient mobile payment for users.

Users can generate a QuickPass card on mobile banking apps as long as their mobile phone is equiped with NFC, which can be identified by POS machines enabled with “QuickPass”. Users don’t need to unlock the screen, scan the QR code, or open certain apps compared to Alipay and WeChat. As long as users activate the phone screen and locate it close to the POS machine, the payment will be processed with a notification beep, which takes about three to five seconds.

Over 20 banks in China including Agricultural Bank of China, China Industrial & Commercial Bank, Bank of China, China Construction Bank, Bank of Communication, Savings Bank, China Commercial Bank and other can generate QuickPass card on mobile apps. Tens of thousands of retail stores such as Carrefour, McDonald’s, Starbucks and other 25 well-known national chain businesses also support the service. Besides, users can enjoy exclusive promotions on these offline stores.

UnionPay aims at not only domestic market but also overseas retailers. In 2015, the acceptance experience of UnionPay QuickPass in overseas markets has been optimized substantially. Currently, there are approximately 100,000 POS terminals in Hong Kong, Macao, Taiwan, Korea, Australia and Singapore accepting QuickPass, while also supporting the mobile QuickPass newly launched by UnionPay on Dec. 12, 2015. On strength of the rapid expansion of its acceptance scope, the overseas transaction volume of UnionPay QuickPass this November is nearly 10 times of that at the beginning of this year.

Alipay and TenPay accounted for 89.1% third-party mobile payment market in the third quarter this year and Alipay (69.9%) led the market with an overwhelming strength basing on Alibaba according to iResearch. By expanding mobile payment scenarios such as utility costs and offline payments, Alipay continues to enhance user stickiness.

Also read: China E-Payment Insights 2015

According to the latest data from China UnionPay, as of 30 August 2015, the number of China UnionPay internet and mobile payment users has exceeded 260 million. China UnionPay online payment has become an important option for cardholders.

So far there are more than 150 countries and regions where China UnionPay card can be used, covering 26 million merchants and 1.9 million ATMs. China UnionPay has set steps in the tourism industry, and strives to achieve the goal of being a global online payment channel.

In the first quarter of 2015, data of Analysys International showedd that transaction value of China third-party payment market reached 3.13657 trillion yuan (US$0.49 trillion), a QoQ increase of 1.43%. Alipay, China UnionPay and TenPay respectively possessed 36.4%, 35.49% and 12.6% market share, which means that a new pattern of the online payment market has been formed and become firmly established in China.

In recent years, China UnionPay online payment products have appeared in more and more mobile internet merchants cashier and has accessed to more than 50,000 domestic and foreign merchants. Its convenient user experience and attractive discounts have attracted online shoppers of all ages. In addition, China UnionPay mobile payments have access to more than 280 banks, covering the widest range of banks in the same industry.

Also read: China E-Payment Insights 2015

In Q1 2015, China UnionPay’s total transaction value exceeded USD$1.9 trillion globally according to the latest data, which also means China UnionPay surpassed VISA for the first time in transaction value, becoming the biggest card liquidation organization in the world. According to the financial report of VISA, the total transaction value of VISA was USD$1.75 trillion in Q1 2015.

Besides, in terms of the number of issued cards by China UnionPay, it has already surpassed VISA, becoming the biggest international bank organization by total number of issued cards and transaction value in Q1 2015.

At present, China UnionPay card can be used in 150 foreign countries and regions with over 26 million merchants and 1.8 million ATMs all over the world. China UnionPay issued 5 billion cards in 40 foreign countries.

In 2014, China UnionPay debit card and credit card’s total transaction volume increased by 52.3%. Further, it is still keeping rapid development in transaction volume.

Also read: E-banking Replacing Over 80% of China’s Banking Transactions

According to China UnionPay, the quantity of chip bank cards (i.e. financial IC cards) released in China in 2014 was doubled compared with the previous year; the total quantity is expected to exceed 1.2 billion.

According to China UnionPay’s statistics report released in 2014, with the increasing perfection of usage environment and expansion of application fields, chip bank card is more increasingly preferred by cardholders.

In 2014, the total transactions of chip bank cards reached RMB6.2 trillion yuan, 4.8 times as much as the previous year. There are about 4 million POS terminals that can accept UnionPay “flash pay” via chip card throughout China.

Compared with traditional magnetic-stripe bank card, chip card is advantageous in sound security and wide application. The People’s Bank of China has clearly stated that, from 2015 onwards, chip cards should be adopted for RMB settlement accounts in the economically developed areas and key industries.

According to UnionPay’s statistics report, inter-bank transaction in China in 2014 amounted to 41.1 trillion yuan, showing a year-on-year growth of 27.3%. According to the domestic transaction data, the trading volume in supermarkets, gas stations and other daily necessities industries still rank top in the residents’ daily consumption in 2014. However, of all nondaily class transactions, real estate transaction showed year-on-year decline for four consecutive quarters over the same period, due to the overall macroeconomic impact, but it significantly rose in the fourth quarter of 2014, showing encouraging trend.

UnionPay’s oversea network has further expanded. UnionPay reports have shown that, by the end of 2014, it has extended to 150 countries and regions, more than 13 million oversea merchants used UnionPay cards, nearly 1.2 million ATMs had been installed in foreign countries, more than 35 million UnionPay cards had been released in more than 30 countries and regions.

Read more: Apple Adds UnionPay Payment for App Store Customers in China

Apple today announced that the App Store has added UnionPay as a payment option for customers in China. China UnionPay is the most popular payment card in China and will provide App Store customers with a simple and more convenient way to purchase their favorite apps. Customers can easily link their Apple ID with a UnionPay debit or credit card for one-tap purchases.

“The ability to buy apps and make purchases using UnionPay cards has been one of the most requested features from our customers in China,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “China is already our second largest market for app downloads, and now we’re providing users with an incredibly convenient way to purchase their favorite apps with just one-tap.”

As a bankcard network, China UnionPay operates China’s national inter-bank clearing and settlement system, develops the worldwide UnionPay Card acceptance network, promotes the issuance and usage of the UnionPay Card as well as other innovative payment solutions, so as to provide quality, efficient and safe payment services to cardholders.

To date, the total number of UnionPay Cards issued both at home and abroad has exceeded 4.5 billion. The UnionPay network has been extended to all cities and rural areas in China. In addition, China UnionPay has enabled UnionPay Card acceptance in over 140 countries and regions through extensive cooperation with more than 400 institutions around the world.

Alibaba is discussing a payment alliance between Apple and Alipay earlier this month that would focus on the Chinese market, and the two parties are currently discussing specifics of a possible partnership.

And, this announced collaboration with UnionPay is for Apple’s App Store and not Apple Pay; it’s still unclear whether Apple will seek a payment partner in China. If they do, Alipay will be most welcome by Chinese users considering it’s the largest mobile payment provider in China.

Also read: Insights of China Mobile Payment (Wechat, Alipay) Users

Alipay’s mobile app exceeded 61.339 million MAUs in August 2014 in China according to EnfoDesk, remaining the most popular mobile payment app, followed by that of Bestpay, Tenpay and Lakala.

In comparison, the top three online payment providers in the first quarter of 2014 were Alipay, Tenpay and Unionpay by total mobile transactions who together represented over 80% of the total market share.

Bestpay is China Telecom‘s mobile payment solution. Bestpay account, once topped up, can be used to make payment on website, by SMS or voice. China Telecom users who use RFID-UIM phone card can use their phone to make payment.

China top 4 online payment mobile apps all had rapid use frequency growth rate , especially Bestpay who had 789.65% growth rate while Lakala had slight decrease in total time spent growth rate in August 2014.

Mobile payment is a big market in China and it’s very competitive. Tencent’s Wechat launched a “card payment” option this month with which users can make fast payment at supported retail chains; this payment is either using remaining fund in Wechat Wallet or linked to the user’s bank ATM card.

Alibaba’s Alipay partnered with Huawei and launched finger payment standard in China, which is first available on Huawei’s smartphone Mate 7. Alipay still dominates China’s mobile payment market in Q2 2014 as it does in online payment market. In addition, more players have entered the market including Baidu; read more here.

Also read: China Online Payment Market Overview for H1 2014

China’s third party internet payment totalled RMB1873.15 billion (USD 302.71 billion) in Q1 2014, with a YoY growth rate of 84% according to iResearch.

With over 300 million users, Alipay remains the market leader in China’s third-party payment market by total transactions, followed by Tenpay and Unionpay; the top 3 has a combined market share of over 80%.

Alipay, Tenpay and Unionpay are also the top 3 in China’s mobile internet payment market according to Analysis International.

Total online payment market in the first quarter of 2014 reached 1.96 trillion yuan, a growth rate of 5.1% QoQ. The top three providers, Alipay, Tenpay and Unionpay represent over 80% of the total.

Alipay, with its payment mobile apps Alipay Wallet, is dominating mobile payment market with over 77% market share by total transactions:

Could Wechat avoid Unionpay to test its POS payment? The answer is yes. Many reliable sources indicated that Wechat POS payment will launch on 22 in March, 2014.

Though Tencent did not comment about the rumor publicly, word said that Wechat POS project was led by a team who also developed Wechat membership card. Wechat POS is consisted of customized POS machine and Wechat payment, targeting offline stores’ payment solution. When a consumer has purchased the products, the customized POS machine will generate a QR code and the consumer could scan the QR code then pay the bill with Wechat payment.

One insider from Tencent revealed that Wechat POS would work as a tool to connect offline stores with Wechat payment and Wechat membership card. Wechat membership card only had stored value and gathering points functions before, it will add payment soon.

Another relative news said that Wechat payment API is open to all verified service account, which requires 20,000 yuan (USD 3,263) deposit and 6% commission.

It means that Wechat begins to expand its payment business both online and offline. Wechat is not the first one to enter offline payment market, Alipay, 99bill and chinapnr all have tried. Offline POS payment is an essential step for third-parties such as Wechat and Alipay to enter retail payment market.

Alipay tried avoiding Unionpay to enter POS payment market, it ended badly and those banks in cooperation with Alipay got huge amount of penalties. Retail payment market is dominated by Unionpay and banks, Alipay’s entering offline payment jeopardized Unionpay’s interest greatly. Though Unionpay has no restraint on third-parties, it could stop third-parties by controlling member banks.

According to People’s Daily report on January 9, 2014, in 2013, Chinese outbound travelers reached 97.3 million, with 14 million more travelers than 2012. It was estimated to break 100 million in 2014.

In 2012, Chinese outbound tourism consumption hit USD 102 billion, ranking the first in the world. According to Song Rui, Chief of Travel Department in Chinese Academy of Social Sciences, said that overseas consumption in 2013 would surely be even higher than 2012.

Chinese outbound tourists have been increasing dramatically, in 2004, there were merely 29 million outbound travelers. The rapid development in China in the past decade created a large population of middle class, who held interest for exploring foreign countries. Besides, many European countries and Asian countries simplified Chinese tourism visa procedures, and expected to attract more rich Chinese tourists.

An increasing number of foreign hotels and shops tried everything to cater to Chinese consumers. For example, a world famous department store Harrods in London revealed that it had hired 70 Chinese speaking staff and installed over 100 Unionpay imprinter/POS.

Alipay, together with 16 other third-party enterprises, were granted with cross-border payment license.

The 17 enterprises are located in five cities and their licenses were granted in different businesses. Alipay, Tenpay, Chinapnr, Allinpay, Unionpay, 99Bill, shengpay,IPS, fuiou, yeepay and chinagpay are allowed in trade in goods, overseas education, air tickets and hotels; yinyingtong is allowed in trade in goods, air tickets and hotels; ebatong is allowed in trade in goods and overseas education; while easipay, Globebill, yiji and qiandai are limited in trade in goods.

This is good news for third-party payment enterprises, e-commerce platforms and enterprises. Online retailer could do business with foreign buyers directly without worrying about individual foreign exchange. It also bring benefits to consumers who purchase products from foreign sellers. They used to pay with Visa or Master dual currency credit card, now they could simply pay with their RMB card through pilot third-party payment platforms.

UnionPay announced a new policy towards third-party payment recently, strongly defending its interest in online payment which caused suspects and guesses from market. It stated that non-financial companies(mainly third-party payment) had to transfer offline transaction to UnionPay before December 31 2013. By the end of July 1 2014, third-party payment online transactions had to link to UnionPay.

As the only bank card settlement service provider in China, UnionPay has monopolized offline transaction. Why does it target third-party payment market this time?

 China Payment Market

China online payment market is dominated by third-party payment, such as Alipay, Tenpay, ChinaPay(UnionPay online payment), 99Bill, etc. Alipay is the biggest market player, with 45% market share. Tenpay occupies about 20% market. UnionPay’s market share is no more than 10%.

Offline payment includes issuing banks, acquiring banks and clearing bank. China major banks are issuing banks, but banks, third-party payment companies and Chinaums (which is belonged to UnionPay) could be acquiring banks. UnionPay is the only clear bank.

UionPay has no competitor in offline transaction, it has stable shared commission. It seems that UnionPay has no reason to compete with third-party online payment, because it has absolute domination in offline payment market and has a pretty high income. Offline third-party payment together make up no more than 20% market share.

Reasons  Why UnionPay Picked a War On Third-Party Online Payment

Online payment market is growing extremely fast, Alipay, Tenpay and other third-party online payment platforms have huge dataflow. Alipay and Tenpay together occupies 70% online payment market. Because of fast payment on third-party payment platforms, they clear transactions with banks directly, thus UnionPay is excluded. Online payment has kept more than 100% annually growth rate in the recent years. When Alipay and other third-party payment companies quietly started their offline payment services, UnionPay reacted strongly.

Central Bank of China newly released acquiring bank management document didn’t prohibit banks and third-party payment direct cooperation. Although it did say online and offline acquiring need to be under unified management, but it didn’t authorize UnionPay to exercise. UnionPay immediately made the announcement to prove it is the only lawful clearing bank.

Last year, online payment transaction reached 7 trillion yuan(USD 1.13 trillion), which was one thirds of offline payment scale. UnionPay wished to enlarge its share in online payment market.

Sina will launch a Square style mobile payment solution with Lakala, a Chinese independent payment solutions powered by China Unionpay.

The cooperation is still under negotiation, said by one staff from Lakala. Lakala would help Sina with hardware and software development and system maintenance. The final product might even be cheaper than Lakala’s own Square style mobile payment.

They also said that Sina mobile payment would be connected with Weibo Wallet, which means users could use Sina square style mobile payment to recharge Weibo Wallet.

Weibo Wallet was launched by the end of 2012, providing an online payment for water and electricity charges, phone bills and transfer service. Weibo Wallet mobile app was launched in March 2013. Sina is determined to enter mobile payment market.

However, cooperation with Sina seems to have conflicts with Lakala own mobile payment in some ways. But La Ka La will have its benefits, not only can they plant their own information into Sina mobile payment in hardware and software, but they are seeking to increase user loyalty through Sina.

iResearch recently released its China Internet Data Report in Q2 2013, giving us a glimpse of China internet performance in Q2.

Online Markets and Online Advertising

As you can tell from the chart above, Mobile won over PC devices on internet segment markets growth, such as shopping, searching, marketing(searching excluded) and game. Online shopping and searching on mobile devices both had a YoY growth as high as 181%, out performed PC devices which only had 39% and 28.6% YoY growth.

Chinese online advertising had a relatively stable market structure, Baidu and Taobao were the two giant in online ads market. Baidu’s revenue from advertising in Q2 reached 7.56 billion yuan(1.23 billion USD), followed by Taobao with 5.61 billion yuan(909 million USD).

Qihoo’s 360, Taobao and Sohu had pretty high QoQ growth rate.

E-Commerce

Online shopping was the driving power of E-Commerce, had the highest YoY growth rate of 45.3%. B2B was still the biggest part in E-Commerce, with 2 trillion yuan(324 billion USD) revenue in Q2 which was 80% of total E-Commerce revenue.

B2C grew twice faster than C2C in Q2 2013. B2C had a 77.4% of QoQ growth rate, while C2C QoQ growth rate was only 31.8%.

Mobile shopping had a strong growth trend in Q2, with 8.6% QoQ growth while shopping on PC dropped 91.4% compared to Q1, 2013.

Chinese online shopping markets were led by Tmall with 50.8% market share and Jingdong with 17.1% share, the competition in the second-tier B2C enterprises were tense.

Online Video Market

Online video providers’ revenue mainly came from advertising,with 75.28% share, during which video ads was the biggest. Besides, copyright licensing distribution occupied 8.61% share, and video value added service occupied 4.3%.

Third Party Payment Market

Alipay occupied 49% of China third party payment market, followed by Tenpay with 20% and Unionpay with 10%?

Alipay was the top app in China mobile third party payment with 66 million monthly users and 20.4% MoM increase rate. However, Bestpay, Lakala,cmpay and yeahka competed with each other fiercely in Q2 2013.

Mobile Internet Market

Mobile shopping surpassed mobile value added service in Q2, becoming the biggest mobile segment market with 38.5% share.

The third-party online payment market continued to grow rapidly in 2012,with the large-scale annual transaction exceeding 3.8 trillion yuan, according to the latest data from Enfodesk.

The third-party Internet payment market share in 2012 remained stable. Alipay, TenPay and Unoinpay stayed the top three with the market share of 46.6%, 20.9% and 11.9%  respectively. Enfodesk study found that the way the third-party payment enterprises diversify its business is mainly reflected in the following aspects:

1. Integrating online with offline payment
2. Providing value added services such as in finance, marketing, finance management helped expand user base and strengthen the effectiveness
3. Developing the potential for the growth of cross-border payments
4. Extending to mobile payment