Apple-Alibaba tie-up to bring Apple Pay to China?

Apple is in talks with Alibaba to bring its mobile payments system to China, according to an interview with Chinese news agency Xinhua.

Apply Pay – which allows users to hold up their iPhone to a reader and pay for items – was launched in the U.S. last September and has seen "great momentum," CEO Tim Cook said last month.

But now the Cupertino, CA-based giant wants to expand the payment system to China -- the company's second-biggest market by revenues.

"We very much want to get Apple Pay in China," Cook told Xinhua in an interview published late Monday. "I'm very bullish on Apple Pay in China." (Tweet this)

A worker demonstrates Apple Pay inside a mobile kiosk sponsored by Visa and Wells Fargo.
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China has become a crucial market for Apple and it is now selling more iPhones in the country than in the U.S. The American company has also eclipsed domestic rival Xiaomi to become the biggest smartphone player in China. (Tweet this)

Apple was not immediately available for comment when contacted by CNBC.


With a huge number of smartphone users in China, expanding Apple Pay into the country makes sense -- but the company will face a number of challenges.

Apple Pay works on a technology known as near-field communication (NFC), a wireless system that allows people to pay with credit cards linked to their smartphone by tapping the device on a reader.

In China, UnionPay – that state-owned credit and debit card operator – dominates the processing of payments made by NFC. As such, UnionPay sets the transaction fees, which could be a potential hurdle for Apple in China.

This is likely one reason why the technology giant is looking to partner with Chinese e-commerce giant Alibaba, which owns its own mobile payment system known as Alipay. This uses different methods of paying for items, such as scanning a special barcode. Alibaba is also experimenting with different authentication methods, such as taking a selfie to authorize a payment.

The exact details of how Alibaba and Apple could work together are unclear, but any partnership will give the U.S. technology giant a way into the mobile payments market in the world's second-largest economy.

"Ant Financial (the Alibaba affiliate behind Alipay) is open to work with various partners in order to provide secure, efficient and convenient online and mobile payment services for over 300 million Alipay users," a spokesperson told CNBC by email.