IP Innovation and Strategy | Dec 20, 2023

Image: Yunan Huang, CEIPI, Masters of IP Law and Management

Decoding IP’s Power Play in Apple Pay vs. Alipay’s Success

In FinTech, two giants stand out and are worth of deep comparison: Apple Pay and Alipay.  For both of these platforms, Intellectual Property (IP) has been instrumental in shaping their business models and strategic approaches.  This article compares the two approaches, drawing insights from a research project conducted by Yanan Huang, a graduate of the Master of Intellectual Property Law and Management at CEIPI, University of Strasbourg.

Apple’s FinTech IP Strategy

Launched in 2014, Apple Pay has become a cornerstone of Apple’s FinTech offerings and offers a simple yet secure transaction method. It leverages Near Field Communication (NFC) technology, which has been the subject of numerous patents. Apple’s focus on making transactions secure and seamless has driven its innovation and patent applications in this area.  Its business model, as detailed in the research, is built around providing customers with a trustworthy payment option. This is achieved through strategic partnerships with vendors and banks, leveraging Apple’s premium brand and IP rights. The Business Model Canvas for Apple Pay highlights its value proposition of security and convenience, which has been a significant factor in gaining customer trust.

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Apple places a strong emphasis on security and privacy, which is critical in the financial sector. Patents related to secure authentication methods, encryption, and data protection are a significant part of Apple’s IP strategy. Technologies like Touch ID and Face ID, which have applications in financial transactions, are underpinned by a robust patent portfolio.

The Apple Card, a credit card offering created in partnership with Goldman Sachs, showcases Apple’s interest in expanding its financial services. The integration of Apple Card with Apple Pay and the Wallet app involves patented technologies that enhance user experience and security.

Beyond just payment processing, Apple Wallet allows users to store and manage digital versions of tickets, boarding passes, and loyalty cards. The technology behind this digital wallet, including its integration with other Apple services, is protected by a range of patents.

Apple continues to explore innovations in payment technologies, including peer-to-peer payment systems and contactless payments through Apple Pay Cash and potentially in areas like cryptocurrency and digital wallets.

In summary, while Apple may not be a FinTech company in the traditional sense, its influence in this sector, driven by its IP strategy and innovative payment technologies, is significant. Apple’s foray into financial services with products like Apple Pay and Apple Card, backed by a strong patent portfolio, underscores its role as a key player in the global FinTech landscape.

Alipay’s Patents and Fintech Ecosystem

Alipay is not just a payment service; it’s part of a larger ecosystem that includes e-commerce, cloud computing, and other financial services like insurance and investment products. Patents related to the integration of these services ensure a seamless user experience and strengthen the ecosystem.  Alipay’s slogan, “EVERYTHING, IMMEDIATE, EVERYWHERE,” encapsulates its approach.

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Alipay’s core service is digital payments, and the company holds numerous patents related to online payment technologies. These include patents for secure transaction processing, QR code payments, biometric verification methods like facial recognition, and more.

Ant Group has been a pioneer in applying blockchain technology to financial services. They have developed and patented several blockchain solutions aimed at enhancing the efficiency, transparency, and security of financial transactions. This includes patents for blockchain-based cross-border payment systems and supply chain financing solutions.

Alipay leverages AI and big data analytics to improve user experience and security. Their patents in this area include fraud detection algorithms, credit scoring models, and personalized financial product recommendations, all of which are crucial for maintaining the integrity and competitiveness of their platform.

So Who Has A Better Strategy and Greater IP Influence?  Do You Agree?

The research project also sheds light on the marketing strategies of both platforms. Apple Pay focuses on three pillars: Apple Wallet, Apple Pay, and Apple Card, promoting these services across physical, digital, and social media channels. In contrast, Alipay’s TechFin ecosystem includes payment, insurance, financial planning, lending, trading, investment, data analysis, and security services, including blockchain technology.

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From a FinTech perspective the research concludes that Alipay seems to have an edge over Apple Pay. It operates independently from Alibaba, aiming to encapsulate a complete FinTech ecosystem, whereas Apple Pay is more of a complementary service within Apple’s broader product range. Market-wise, both platforms dominate in their respective domestic markets but face challenges in international expansion. Apple Pay’s single-service approach contrasts with Alipay’s comprehensive range of financial services.

Secret Sauce

Beyond intellectual property, key players have a multi-pronged approaches to their business model and strategic positioning.  Ultimately, companies must execute efficiently and manage evolving market, geopolitical, and regulatory risks to remain on top, including:

-> Continuous investment in research and development is key to staying ahead in the FinTech patent race. These companies invest heavily in exploring new technologies and their applications in finance.

-> Companies like Alibaba and PayPal process billions of transactions, providing them with vast amounts of data. This data is crucial to garnish insights and develop new financial technologies and services.

-> These leaders do not just focus on one aspect of FinTech but explore, innovate, and operate across diverse dimensions like payment processing, cybersecurity, blockchain, and AI, ensuring a broad and impactful patent portfolio.

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-> Many of these companies actively acquire startups with promising technologies or collaborate with other industry players to expand their technological capabilities.

-> Having a global footprint allows these companies to understand and innovate according to the diverse needs of different markets, making their patents more globally relevant.

-> Understanding and navigating the complex regulatory environments in different regions is crucial for FinTech innovation. These leaders are adept at aligning their patent strategies with regulatory requirements.

Conclusion

While Apple Pay capitalizes on the strength of Apple’s brand and its secure, user-friendly payment service, Alipay’s comprehensive ecosystem approach, backed by robust technology and a wide range of services, sets a different standard in the industry.  Which company will emerge as the dominant force in the future of FinTech, Apple Pay or Alipay, and why? In what ways can new players in the FinTech space leverage IP to challenge the dominance of established giants?

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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• Source: https://ncfacanada.org/ip-influence-on-apple-pay-alipays-business-models/