Aug 18, 2017 11:36 AM

UnionPay Attempts Mobile Payment Catch-up through Partnership with Internet Giant

In China’s advanced mobile payment scene, UnionPay has always been a step behind, whether in terms of the development of mobile apps or QR-code-based payment services. Unlike more agile tech companies such as Alibaba’s Alipay and Tencent’s Tenpay, state-owned UnionPay has been struggling with drastic innovation moves due to regulators’ safety concerns. But as China’s largest card-payment network operator, the company won’t sit back and wait to be marginalized. It needs to act quickly to improve its mobile user experience and client management capability, as well as its marketing strategies. In this context, JD Quick Pass, the new touch-and-go service jointly launched by UnionPay and, might be a key resolution for UnionPay to catch up in an increasingly cashless economy.

In fact, UnionPay is a forerunner in China’s offline transaction market. Aiming for wide interconnection and providing transaction settlement networks, the Chinese financial heavyweight has set up a payment system extending through and beyond national borders over the last decade.

Meanwhile, as a latecomer in the online payment field, JD Finance, the payment unit of, has no intention to compete with UnionPay, but seeks to combine its technological edges with the latter’s offline payment dominance. It seeks to help UnionPay regain traffic and upgrade its payment method through its Near Field Communication (NFC) technology platform, known as Quick Pass. JD Finance would become UnionPay’s primary channel of customer acquisition and mobile payment under this cooperation scheme. Their partnership is also expected to reinforce the role of banks, while at the same time reinforcing the positioning of payment service providers as “being convenient and efficient in settling small transactions”.

The two collaborated easily. On July 19, UnionPay and announced the JD Quick Pass NFC-based payment service. It is the first time for UnionPay to incorporate the account of a third-party payment provider into its clearance system, marking a major leap from card-based payment to digital-account-based payment.

Alipay and Tenpay, the two big players currently dominating China’s mobile payment market, operate on a “three party model” which bypasses UnionPay and regulatory authorities. The model directly connects the third-party payment providers with banks and individual customers. The transactions are handled separately under different terms between payment service providers and banks. This practice has raised concerns because it is difficult for banks to maintain consistent standards and control risks.

Distinctively, JD Quick Pass takes a four-party path in which only acts as a funnel to reroute money and acquire more customers, while UnionPay gains full access to transaction information. The new service routes all transactions back to the customer’s account and clears them through UnionPay’s fund transfer network. The money does not go through, who will submit every last detail of each transaction. Therefore, it will neither change the path of money flow, nor cut off the information flow among banks, business owners and individual card-holders, as some digital wallet apps have previously done. In this way, the new model has established a transparent and consistent payment process in which all member organizations can settle their transactions through UnionPay’s inter-transfer and clearance network, thus helping to achieve “penetrative regulation” and address the concerns of regulatory bodies on financial risks and money laundering.

However, the plan is just the first step for UnionPay to strengthen its competitiveness. The next step awaiting is to expand its cooperation with and other Internet companies, including innovation in payment methods, achieving wide application of Big Data-related technology and ultimately reshaping the global payment landscape.

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