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Samsung Electronics Co. agreed with Alibaba Group Holding Ltd.'s financial-services affiliate to cooperate on mobile payments, as the world's largest smartphone-maker looks to expand its presence in China, a market where it has struggled in recent years.

In a statement, the companies said Samsung's mobile payment service, dubbed Samsung Pay, will work with Alibaba affiliate Ant Financial Services Group's Alipay, which has more than 450 million active registered users. Ant Financial 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 it is desperate to restore its fortunes in.

Samsung's fortunes in China have taken a slide in recent years. Following years as the dominant No. 1 smartphone player in the country, Samsung has tumbled to sixth position, overtaken by domestic handset makers including Huawei Technologies Co., Xiaomi Corp. and others.

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, Alipay signed a deal with Uber Technologies Inc. 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 online 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, followed by other payment systems trying to gain more traction, including Apple Inc.'s Apple Pay, which launched in February, and Huawei Pay, a service started by Samsung's Chinese rival Huawei.

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.

Write to Jonathan Cheng at jonathan.cheng@wsj.com and Alyssa Abkowitz at alyssa.abkowitz@wsj.com

(END) Dow Jones Newswires

May 19, 2016 22:45 ET (02:45 GMT)

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