Feb. 18 marks the first anniversary of Apply Pay's entry into China. Despite being the most popular third-party payment service in the U.S., Apply Pay is currently underperforming its expectations in China. Local payment services utilizing QR codes, such as WeChat and Alipay, are squeezing Apple Pay out of the market, the National Business Daily reported.

According to Analysys, a big data analysis provider, domestic payment service providers took almost 99 percent of the market share in China’s third-party mobile service industry in the third quarter of 2016. Of them, Alipay received 50.24 percent of the market share, followed by WeChat's 38.12 percent.

Compared with QR code payments, reliance on hardware has hindered the growth of near-field communication (NFC) payments, which is Apple Pay's chosen mode, a UnionPay insider noted. Apple Pay only works on iPhone 6 devices and above, which also restricts the number of users.

In addition, the cost to maintain and upgrade the POS that supports NFC payment is high. There are currently about 6 million POS that support NFC payment nationwide. It costs 300 RMB to upgrade a POS, and a new POS costs roughly 600 RMB. It therefore remains a significant challenge to convince shops to upgrade or install new POS in substantial numbers. WeChat and Alipay also offer higher subsidies to shops that use their payment services, which discourages shops from setting up Apple Pay.

As major drivers of Apple Pay in China, UnionPay and several major banking institutions actively promoted the service when it first entered China. But many of these institutions have already shifted their focus to QR code payments.

However, the question remains: Does Apple Pay have a chance to stage a comeback?

"From a technical perspective, NFC payment will have more market space in the future," predicted the UnionPay insider. Li Chao, an analyst with iResearch, remarked that there is good reason for Apple Pay to exist in the Chinese market, as NFC technology offers advantages in security.