Samsung Pay Partners with Alibaba’s Alipay on Payments

As Samsung looks to expand its footprint in the world’s second-largest economy, the South Korean company has struck a partnership with Alipay, China’s biggest payments service that is run by Alibaba affiliate Ant Financial.

Alipay at resent is placed as a separate app on devices. When a customer goes to pay for something in-store, they have to scan a QR code provided by the retailer after having opened the Alipay app.

However that code from an Alipay option would be allowed to be scanned in the Samsung Pay wallet itself for Samsung users.

Samsung Pay works with traditional magnetic stripe technology as well as it works by allowing consumers to tap their smartphones on a near-field communication (NFC) terminal. However, users of Alipay via Samsung Pay will still have to scan the retailer’s QR code.

Samsung users can access their code quickly by just swiping up on a locked phone screen, removing the need to access a new app. While this is not a radical departure from the existing way of paying with Alipay, it certainly eases the function to some extent.

“It reduces friction and time to make a purchase will increase adoption,” Jack Kent, senior mobile analyst at HIS said while talking to CNBC.

The number of people using Samsung Pay could be increased with this tie up which is the advantage for the smartphone company from the deal. Alipay processes 170 million transactions per day from among the 450 million users it has. Alipay is deeply ingrained in the Chinese consumer’s mindset and is China’s biggest payments service, beating solutions provided by the likes of Tencent.

Helping to stoke adoption of the Samsung payment technology as it battles Apple, Samsung hopes these consumers will now access their Alipay accounts via Samsung Pay.

While Apple, Samsung’s rival launched Apple Pay in China February, Samsung only managed to launch Samsung Pay  in March. The partnership with Alipay will help Samsung navigate the regulation as well as build relationship with consumers in China as foreign companies have found it tough going in the country.

Payment services could prove crucial for Samsung in China as they are seen as a big differentiator for device makers. IN the first quarter of 2016, there has been a fall in the market share of the South Korean electronics giant in China to 7 percent from 10 percent in the same period last year. Mobile payments could be a way to reverse that trend.

“Mobile payments are sticky and they provide access to generally wealthier segments of the mobile market, so having mobile payments on devices is not the only route to success but it is one major pathway,” Neil Mawston, analyst at Strategy Analytics, told CNBC by phone.

(Adapted from CNBC)

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