Samsung Electronics Co. agreed with Alibaba Group Holding Ltd.'s financial-services affiliate to cooperate on mobile payments, as the South Korean smartphone maker looks to expand in China, a market where it has struggled in recent years.
On Friday, the companies said Samsung's mobile payment service, dubbed Samsung Pay, will work with Ant Financial Services Group's Alipay, which has more than 450 million active registered users. The Alibaba affiliate recently completed a financing round of $4.5 billion, valuing the privately held company at about $60 billion.
For Samsung, which is touting Samsung Pay as a selling point for its premium devices, a tie-up with Alipay could give its service wider reach in a market where it is desperate to regain momentum.
Samsung is the world's biggest smartphone maker but its fortunes in China have waned in recent years. Following years as the dominant No. 1 smartphone player in the country, Samsung has tumbled to sixth position, overtaken by Huawei Technologies Co., Xiaomi Corp. and other domestic handset makers.
For Alibaba, working with the world's largest smartphone maker could help it expand overseas, a priority for the company.
Last month, Alipay launched in Europe, and earlier this year Uber Technologies Inc. agreed to allow Chinese users to pay for rides with Alipay while traveling outside mainland China.
Alipay handles an estimated 58% of all online payments in China, according to Credit Suisse, underscoring the uphill battle that Samsung faces as competition for mobile payments increases in the world's biggest smartphone market. More than 358 million Chinese use payment systems on their smartphones, according to data from the China Internet Network Information Center.
Tencent Holdings Ltd.'s WeChat Pay has the second-largest market share in China. Other systems trying to gain traction include Apple Inc.'s Apple Pay, which launched in February, and Huawei Pay, a service started by the Chinese smartphone maker.
The South Korean smartphone maker began pre-loading Samsung Pay on its premium handsets last year, and in March added support for China, in conjunction with state-run UnionPay, the country's dominant card issuer.
While Alipay is mostly used for settling online transactions, it is increasingly being accepted by brick-and-mortar retailers and restaurants around China.
Samsung Pay allows Samsung smartphone users to load their credit card information onto their handsets and use them to pay at cash registers equipped either with next-generation near-field communication technology, or with traditional magnetic-stripe machines.