Apple Pay Expands Support for Interoperable Closed-Loop Transit Cards in China

_{(This premium article was originally published in April 2020. © Mobility Payments and Forthwrite Media.)}

Apple on Wednesday expanded support for closed-loop transit payments across China, incorporating China’s T-Union interoperable transit cards in its Apple Pay service.

Apple, which like other NFC-based Pays wallets, has a low mobile payments market share in China in the face of competition with dominant wallet apps Alipay and WeChat Pay. That’s one reason Apple wants to increase the utility of its Apple Pay service by supporting transit payments in more cities in the massive Chinese payments market. Of course, Ant Financial’s Alipay and Tencent’s WeChat Pay, which both use QR codes for transmission of data between smartphones and terminals, also support transit payments throughout China.  

And Apple is by no means the only NFC Pays wallet that enables T-Union cards in China for transit payments. Huawei Pay and Mi Pay from Xiaomi also support a range of cities, and Samsung Pay and Meizu Pay also back interoperable transit cards in some of the same cities.   

Interoperable T-Union closed-loop transit cards can be used in more than 250 cities throughout mainland China, including in such mega-cities as Shanghai, Beijing, Guangzhou, Chongqing and Tianjin, as well as a range of large and small provincial cities. 

Apple has enabled transit ticketing with closed-loop city cards in Shanghai and Beijing since 2018, although it was also not the first NFC wallet to enable transit payments in these two top-tier cities. Huawei Pay, Mi Pay and Samsung Pay all beat Apple to support for these and other Chinese cities. All of the NFC wallets also support open-loop transit payments, with credit and debit cards using the QuickPass contactless application from payments network China UnionPay. Open-loop transit is available in a select number of cities, such as Guangzhou and Hangzhou. 

But open-loop transit payments don’t have nearly the reach of closed-loop transit cards in China, especially those supporting the interoperable specification from the Chinese government for microprocessor chip cards that went live in 2015. The T-Union system allows transit authorities to issue their cards in one city and have them accepted in others. Clearing and settlement is reportedly done by China UnionPay. Cards supporting the specification carry a special T-Union logo, though topping up of the cards is reportedly more restrictive. 

The adoption of T-Union-based cards by Apple and the other Pays wallets gives users of the closed-loop city transit cards the ability to tap to pay for rides on public buses and subways throughout mainland China. Apple stores the cards on a microprocessor NFC chip from NXP Semiconductors embedded in its iPhones and Apple Watches.

In addition, Apple has made the T-Union-based cards eligible for its “Express Transit” mode, which allows users to avoid authenticating themselves with biometrics or PIN codes, like they must do when making retail payments. In order to make payments on board buses and at subway gates, users need only have their devices turned on and tap them on readers. Certain models also enable payments when users are running on very low battery power. 

Apple had earlier enabled Express Transit for the Shanghai and Beijing city cards in its wallet. The only other transit cards that Apple has designated for Express Mode is Tokyo’s Suica card, which is interoperable in Japan, and the Hop Fastpass card in Portland, Ore., as well as open-loop transit payments in Portland, London and New York City.  

But despite its drive to enable more transit payments, Apple has yet to add Hong Kong to the list of cities where users can tap for rides with Apple Pay. That is despite an announcement by Octopus Cards Ltd. last July that its popular closed-loop transit card, Octopus, would be enabled for Apple Pay by the end of 2019. It is still not available, even though Samsung was able to implement Octopus for Samsung Pay, launching the service in December 2017. Like the Suica card in Japan, Octopus uses FeliCa contactless technology from Sony Corp. 

But a bigger issue for Apple and the other NFC Pay wallets is the continued dominance of the multitrillion dollar mobile payments market in China by the Alipay and WeChat Pay wallets. Chinese-based research firm iResearch said the two wallets continued to hold a combined market share of around 95% at the end of 2019 in China, mostly for payments at retail stores. 

But in the end, it’s more important that Chinese consumers buy Apple devices and use them for payments, which helps explain the reports last month that Apple will support the Alipay wallet service in China as part of Apple Pay starting next September. 

Outside of mainland China, NFC wallets have a better chance of grabbing mobile-payments market share by enabling transit payments, and Apple and other backers of Pays wallets, including Google and Samsung, plan to recruit more transit agencies and to enable both open-loop and closed-loop cards.

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