Ma­jor for­eign play­ers to en­ter clear­ing mar­ket for bank cards

China Daily (Canada) - - FRONT PAGE - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

For­eign com­pa­nies such as Amer­i­can Ex­press Corp, MasterCard Inc and Visa Inc hope to en­ter China’s yuan­de­nom­i­nated bank card clear­ing mar­ket, which is worth $73 tril­lion a year.

Frame­work rules were pub­lished by the State Coun­cil on Wed­nes­day, which could open up an in­dus­try that is dom­i­nated by China UnionPay Co Ltd.

Un­der ex­ist­ing reg­u­la­tions, the com­pany is the only clear­ing ser­vice provider for yuan-de­nom­i­nated bank card pay­ments.

“For­eign clear­ing ser­vices providers may join the mar­ket by ap­ply­ing for li­censes, which will add more brands (and pro­vide more) com­pe­ti­tion,” the Peo­ple’s Bank of China, the coun­try’s cen­tral bank, said in a state­ment. “The open­ing-up will ac­cel­er­ate the China pay­ment mar­ket’s re­forms and in­no­va­tions.”

From June, for­eign com­pa­nies can ap­ply for bank card clear­ing ser­vices by set­ting up Chi­nese branches or ac­quir­ing a lo­cal part­ner, ac­cord­ing to the rules.

By the end of 2014, there were 4.9 bil­lion bank cards in China with trans­ac­tions to­tal­ing 449.9 tril­lion yuan ($73 tril­lion). About 48 per­cent of re­tail pur­chases were paid through bank cards com­pared with 4.7 per­cent in 2002 when they first be­came popular, PBOC data showed.

Un­der the new rules, the cen­tral bank hopes to in­crease com­pe­ti­tion in the in­dus­try and pro­vide a bet­ter ser­vice for Chi­nese con­sumers.

So far, for­eign com­pa­nies with a stan­dard bank card clear­ing sys­tem and reg­is­tered cap­i­tal of at least 1 bil­lion yuan will qual­ify for bank card clear­ing fa­cil­i­ties in China.

Clear­ing com­pa­nies connect banks, shops and card users. They set­tle trans­ac­tions by turn­ing the prom­ise of pay­ment into the ac­tual trans­fer of money from one bank to an­other. Clear­ing com­pa­nies make prof­its by charg­ing com­mis­sion on th­ese trans­ac­tions.

Although the new pol­icy is still short of de­tails, a more ex­ten­sive frame­work of rules will be in­tro­duced later this year, ac­cord­ing to the PBOC.

“We are hope­ful th­ese new reg­u­la­tions will per­mit ad­di­tional par­tic­i­pants in theChi­nese do­mes­tic mar­ket,” Visa said in a state­ment on Wed­nes­day. “Visa will re­view the new reg­u­la­tions and looks for­ward to fur­ther im­ple­men­ta­tion de­tails to be pub­lished by the rel­e­vant author­ity. Visa’s long-term com­mit­ment to our client fi­nan­cial in­sti­tu­tions and busi­ness in China re­mains un­changed.”

Aspokesman for Amer­i­can Ex­press from its Shang­hai of­fice said the com­pany would be re­view­ing the rules with great in­ter­est.

The move to open up the credit card clear­ing mar­ket came af­ter the United States gov­ern­ment­brough­ta­case to the World Trade Or­ga­ni­za­tion in 2012. The US chal­lenged China’s re­quire­ments that for­eign card com­pa­nies must use China UnionPay’s net­work for yuan-de­nom­i­nated trans­ac­tions.

In July 2012, theWTO told China to stop dis­crim­i­nat­ing against for­eign pay­ment com­pa­nies.

A state­ment on Wed­nes­day­byChi­naUnionPay said it sup­ports the State Coun­cil’s de­ci­sion to open up the bank card clear­ing mar­ket.

Es­tab­lished in Shang­hai in 2002, China UnionPay has more than 4.6 bil­lion bank cards, which can be used in more than 150 coun­tries and re­gions, ac­cord­ing to its web­site.

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