Apple App Store's Chinese Customers Get New Way to Pay for Purchases

By Alyssa Abkowitz Features Dow Jones Newswires

Apple Inc. is now allowing Chinese customers to use popular local mobile-payment system WeChat Pay for purchases in its App Store, underscoring the expanding reach of the service owned by technology titan Tencent Holdings Ltd.

Continue Reading Below

Apple's decision to accept payments from the service came despite recent tensions with Tencent, including over the Chinese company's rollout this year of a "mini-program" system that has been seen as a competitor to the App Store.

"We are committed to offering customers across our ecosystem a variety of payment options that are simple and convenient," Apple said in a statement.

In the second quarter of this year, Apple's App Store pulled in more revenue in China--an estimated $2.2 billion--than in any other market, according to mobile-analytics firm App Annie.

Tencent's latest victory comes as it challenges the more established Alipay mobile-payment system backed by local rival Alibaba Group Holding Ltd. As WeChat Pay, which controls 40% of the Chinese market, has gained wider acceptance, Alipay's market share has fallen from 80% in 2014 to about 50% currently, according to data from iResearch Consulting Group. Apple began accepting App Store payments from Alipay in November 2016 and from state-backed network UnionPay two years earlier.

WeChat has become an all-purpose smartphone utility in China, with nearly one billion monthly active users who rely on it for mobile payments, social messaging and entertainment, among other functions.

Continue Reading Below

Chinese smartphone users spend so much time on WeChat that some analysts say they believe it could hurt sales of Apple's 10th-anniversary iPhone expected in September, since consumers here won't see the need to upgrade their handsets as long as they can access the platform.

Apple has said it views Tencent, one of the world's biggest players in mobile games, as a partner. On an earnings call with analysts earlier this month, Chief Executive Tim Cook said that Tencent is "one of our biggest and best developers" and that Apple looked forward to working with the company "even more."

However, the decision to accept WeChat Pay comes as Apple struggles to gain traction with its own mobile-payment system, Apple Pay, which made its debut in China in May 2016. The system's footprint in the country's market is negligible, according to iResearch.

Also, Apple has recently sparred with Tencent over purchases in the App Store. Earlier this year, Apple forced the Chinese company's messaging app WeChat to disable its "tip" function to comply with App Store rules. The function allowed WeChat users to give small amounts of money to authors and other content creators as gratuities via transfers from mobile-wallet accounts. Apple considered these payments to be in-app purchases, of which it takes a 30% cut.

Following Apple's decision to accept WeChat Pay, Chinese netizens on social media brought up the tipping spat. "Apple finally lowers its head to Tencent," one wrote. "Come come come, every dog will have his day. Now it's [Tencent Chief Executive] Pony [Ma]'s turn to get the 30% fee," wrote another.

Earlier this month, a group of 28 Chinese app developers filed a complaint alleging antitrust violations by Apple, including excessive fees for in-app purchases. The State Administration for Industry and Commerce and the Ministry of Industry and Information Technology told The Wall Street Journal in mid-August they were reviewing the complaint.

Apple has said that "most submissions in China are reviewed and approved to be on the store within 48 hours, or less." The company also has said its App Store guidelines apply equally to all developers in every country and that if an app is rejected or removed, developers may request a review to restore it in a timely manner.

Xiao Xiao contributed to this article.

Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com

(END) Dow Jones Newswires

August 30, 2017 03:41 ET (07:41 GMT)