Apple Inc. seeks by early February to launch its new Apple Pay electronic-payment service in China—a vibrant but fiercely competitive market for digital money—according to people familiar with its discussions.

The Cupertino, Calif., company has struck deals recently with China’s big four state-run banks, the people said, by which potential Apple Pay users could link the service with their local bank accounts.

Apple Pay could still face regulatory hurdles in China, where banking and e-commerce are overseen by a number of government agencies, the people said. Apple hopes to launch before Feb. 8, China’s Spring Festival holiday.

How much Apple would charge for purchases made through Apple Pay has been a sticking point, say the people involved with the discussions. In the U.S.it gets 0.15% of all credit-card transactions and 0.5 cents per debit transaction, according to people familiar with the matter.

An Apple spokeswoman declined to comment. Press officials for two of China’s big four state banks, Industrial & Commercial Bank of China Ltd. and China Construction Bank Ltd., declined to comment. Press officials for the other two, Agricultural Bank of China Ltd. and Bank of China Ltd. didn’t respond to requests for comment.

Apple Pay works on Apple’s latest iPhone models, such as the iPhone 6 and 6S. It is based on near-field communication technology, which allows users to tap their devices on readers at store sales counters and complete purchases by scanning their fingerprints.

Sales of the iPhone in greater China, which includes Hong Kong and Taiwan, were up 87% from a year earlier in the quarter ended Sept. 26. Apple’s overall greater China sales were up 99% to $12.5 billion.

Success for Apple Pay in China could boost the fledgling system, launched last year and currently available in the U.S., the U.K., Canada and Australia. Apple Chief Executive Tim Cook has been in close contact with Chinese government agencies and has said publicly that he would like to bring Apple Pay to China as soon as possible.

One Chinese developer who has seen the latest beta version of Apple’s mobile-operating system said logos for China’s UnionPay can be found within the package. China UnionPay Co. press officials didn’t respond to requests for comment.

Apple Pay is looking to enter a market where electronic payments are booming but entrenched rivals dominate. State-run UnionPay holds a monopoly on processing credit-card and debit-card payments, effectively locking out MasterCard Inc. and Visa Inc.

In the private sector, electronic payments are dominated by Alipay,run by an affiliate of Alibaba Group Holding Ltd., and Tenpay, run by Tencent Holdings Ltd. Alipay had nearly 45% of the market as of the second quarter and Tenpay almost 19%, according to research firm Analysys.

Apple could gin up interest from potential partners. Last year Alibaba Executive Chairman Jack Ma told The Wall Street Journal’s WSJD Live technology conference he was interested in joining with Apple on financial payments, provided it was a “marriage” that both sides want.

In June, Apple registered an entity in Shanghai’s free-trade zone to operate the Apple Pay business, according to official media and the Shanghai government’s company-registration database.

By YANG JIE & YINGLING WEI November 24, 2015 in The Wall Street Journal