China‘s reported push back today against Apple’s entry into the Mainland’s payments space is nothing more than “optics” for negotiation purposes, a payments source close to Apple told Bank Innovation.
“This is classic China negotiations — the agreements were signed months ago,” the source said. “This is a way to claw back some provisions and was anticipated by Apple.”
A story on Caixin Online, a business website based in Beijing, reported yesterday that Chinese officials maintain that Apple “has not yet ‘acknowledged regulators’ and as a result ‘it’s unclear whether the product meets the government’s requirements’ for a commercial operation.
Apple is also struggling with its relationship with UnionPay, China’s state-owned credit and debit card system operator. Sources close to the companies said that talks aimed at an agreement that would open China to Apple Pay have stalled.
The central bank official who asked not to be named said regulators have not intervened in negotiations between Apple and UnionPay, which began last year and were reportedly aimed at an agreement by March.
But our source pointed out that Apple Pay is “already live and [has] been tested in China for a few months” by UnionPay employees. “China knows this well. The deal now is to close the vice on Apple to get a realignment, perhaps a few extra points back.”
Interestingly, the Caixin post quotes a bank source as saying that “Apple Pay’s 0.15% fee is too high for China,” even as China’s top economic planner, the National Development and Reform Commission, allows payments companies to charge merchants fees between 0.38% and 1.25%. Alipay, by comparison, charges at least 70 basis points per transaction.
Sources close to the talks between Apple and Chinese banks with which it’s negotiating say these talks are revolving around how the American company might cooperate with UnionPay. The talks, which started late last year, involve at least eight banks including China Merchants Bank, Bank of China, China Construction Bank, and the Industrial and Commercial Bank of China. The talks have also hit snags over profit-sharing issues, according to sources. …Some industry watchers say Apple is also facing headwinds because UnionPay does not want to lose the power it has over financial transactions.
China is apparently trying to force Apple to open a mainland data center to house all Chinese customer-related information tied to Apple Pay clients to “prevent data leaks.”
“This was all anticipated by Apple,” our source told us. “This is just a way for China to keep Apple awake; this is politics more than anything.”
Apple launched Apple Pay last September.