Alibaba, Apple talk up possible alliance in mobile payment

29 Oct 2014 | Author: | No comments yet »

Alibaba eyes payments tie-up with Apple.

LAGUNA BEACH, California: Apple Inc CEO Tim Cook fired back at CVS and Rite Aid on Monday after the drugstore chains blocked the iPhone maker’s mobile payments service, saying there were plenty of other retailers around the world to sign up.During the Wall Street Journal live technology conference in California, Alibaba chief Jack Ma seemed keen to get its Alipay payments system to work with Apple Pay.

Alibaba Group Holding, which recently raised $US25 billion, in the world’s biggest initial public offering in the US, is interested in partnering with Apple Inc. in financial payments, the Chinese company’s executive chairman said. — Apple Inc.’s chief executive, Tim Cook, said the company’s new mobile payment system had over 1 million activations in the first three days it was available and is now more widely used than any competing payment system. ‘‘We’re already number one. More than 50 companies make up this group, the so-called Merchant Customer Exchange or MCX, including global retail giants like Walmart, Best Buy and Gap Inc. Alibaba affiliate Alipay is China’s largest payments service, while Apple just this month debuted its own version of a mobile wallet, letting iPhone 6 users make payments at retailers with their smartphones. We’re more than the total of the other guys,’’ Cook boasted during a tech industry conference. ‘‘And we’ve only been at it a week.’’ He said Visa and MasterCard officials have told Apple that the Apple Pay system is already seeing more use than similar ‘‘contactless’’ methods of paying for retail purchases.

Ma, who amassed a fortune estimated at $25 billion partly through his stake in recent market debutante Alibaba, is a frequent visitor to the United States. While Apple has partnered with major banks and large retail chains including Macy’s Inc., Walgreen Co., and McDonald’s Corp., critics have noted that its system is not accepted by a number of other large chains. Note that Apple has already spoken about making Apple Pay available in China , which is a huge market for Apple’s products including the latest iPhone 6. They see the mobile wallet as a way to help retailers understand more about their customers’ shopping habits and, potentially, let merchants avoid the high fees they pay when processing credit card transactions.

Apple Pay was launched on Oct. 20, and within three days, 1 million credit cards were already activated, said Tim Cook, Apple’s chief executive, at a tech conference in Laguna Beach, Calif. Apple jumped into payments this month with the launch of Apple Pay, a service that will help users of the latest model iPhones pay for items in stores or in mobile apps. Alibaba, which handles more e-commerce transactions than Inc and eBay Inc combined, does not have much of a presence among American retail customers and Ma said his focus for now was on serving his Chinese clientele. Cook also said he plans to talk this week with Jack Ma, executive chairman of the Chinese e-commerce giant Alibaba, about a possible partnership, although he offered no details. Cook was also asked if he would make a low-cost iPhone for emerging markets, to which he replied, “We’ll go as low as we can while maintaining the customer experience.” This means the iPhone 5c is as cheap an iPhone could get and, considering Apple has no new iteration of the 5c, a low-cost iPhone may never see the light of the day.

He said Alibaba has all the traits of a company that Apple would like to partner with, though he didn’t specify whether Apple will work with Alibaba in payments. The problem is that under the terms of their MCX contractual agreement, they are not supposed to accept competing mobile payments products like Apple Pay, according to multiple retailers involved with MCX, who spoke on the condition of anonymity. But the driving force behind developing a retailer-owned mobile payment solution is to avoid paying credit card transaction fees to card companies like Visa (V.N) and Mastercard (MA.N), analysts said. In July, Alibaba announced a deal with Lions Gate Entertainment Corp. to make available on Alibaba set-top boxes offerings such as the “Twilight” hit vampire movie series and the TV show “Mad Men.” Since its IPO in September, Alibaba shares have risen 44 per cent and the company has a market capitalisation of more than $US240 billion, making it larger than Amazon and eBay combined.

But he said that sales of Apple’s Mac computers are growing faster than the overall personal computer industry, which has struggled in recent years. Apple Pay is already accepted at 220,000 store locations, including Whole Foods, Walgreens, McDonald’s, Macy’s, and Nike, and more retailers are expected to join. Alibaba transacted nearly $US300 billion in gross merchandise value in the 12 months through June on its Chinese retail marketplaces like Taobao and Tmall. He also talked about the upcoming release of an Apple smartwatch and dropped broad hints about Apple’s work on a new television product, which has been rumored for years. When asked upfront about the smartwatch’s battery life, he said ” “We think people are going to use it so much you will end up charging it daily.” While this does not reveal much, the Apple Watch might last for just about a day, which puts it in the same category as the Moto 360.

Apple hasn’t released further data on Apple Pay, but on the product’s first day, Avin Arumugam, digital executive director for Chase bank told Bloomberg that seven times more people connected their credit card to Apple Pay than signed up for a new credit card. If Apple Pay continues to gain popularity with customers and retailers, more users could switch to an iPhone, and the mobile payment market could go from $12.8 billion in 2012 to $90 billion in 2017, according to Forester Research. Ma also said that he hopes to connect more American small businesses with China’s booming market, citing huge demand for foreign goods among Chinese consumers. Speaking earlier, Ma said he is looking for a variety of US partners for Alibaba Group, the Chinese company that held a record stock market debut on Wall Street earlier this year. At stake is the future of how consumers choose to pay for things, with technology companies, credit card businesses and retailers all fighting for a piece of what may become a $90 billion mobile payments market, according to projections from Forrester.

Both sides should listen.” Hong Kong students have taken to the streets for more than four weeks to protest Beijing’s decision to allow only prescreened candidates to run for the city’s highest chief executive position. If retailers had access to this data, it could be used to deliver relevant deals and loyalty points to consumers, which could increase these companies’ bottom lines. At the conference on Monday, Cook answered a question about retailers who are reluctant to use Apple Pay: “In the long arc of time, you’re only relevant as a retailer and merchant if your customers love you.”

And while many industry experts expect mobile payments to rise over the next five years, there is no guarantee that consumers will find mobile wallets any more convenient than paying with cash or a credit card. And if that is the case, MCX may have picked the wrong mobile wallet to back. “When these contracts were signed several years ago, no one knew about Apple Pay, or what mobile wallets were going to look like,” Ms.

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