UnionPay tai­lored for global growth

China Daily (Canada) - - FRONT PAGE - By PAUL WELITZKIN and ZHANG YUE in New York

For Ge Huay­ong, chair­man of China UnionPay, ev­ery for­eign trip is about learn­ing the lo­cal mar­ket and how to tai­lor the com­pany’s ser­vices to a par­tic­u­lar coun­try.

By offering such coun­tryspe­cific ser­vices, the com­pany’s global strat­egy for ex­pan­sion is suc­ceed­ing, he said.

UnionPay, a fast-grow­ing bankcard as­so­ci­a­tion, be­came the largest pay­ment- card net­work in the world ear­lier this year, ac­cord­ing to the mar­ket-re­search firm Pack­aged Facts.

Ge said he was very proud of his com­pany rank­ing ahead of com­peti­tors Visa Inc and Master­Card Inc.

“While we have made some no­table ac­com­plish­ments, we still haven’t achieved great suc­cess like Visa,” Ge told China Daily in an in­ter­view in New York dur­ing a busi­ness trip. “For ex­am­ple, we han­dle fewer trans­ac­tions than Visa and our profit mar­gin is smaller than Visa or Master­Card.”

Ge, a na­tive of China’s He­nan prov­ince, wants UnionPay to use lessons it has learned in China as a foun­da­tion for growth into a global bank-card com­pany.

China UnionPay be­gan in 2002 with a view to en­able in­ter­bank pay­ment trans­ac­tions in China.

In 2004, the com­pany be­gan to ex­pand over­seas, which led to the found­ing of its sub­sidiary, UnionPay In­ter­na­tional. Now it has part­ner­ships with more than 400 in­sti­tu­tions world­wide, and its global net­work cov­ers more than 150 coun­tries and re­gions. There are about 5 bil­lion UnionPay cards in use glob­ally.

We pro­vide ser­vices wher­ever Chi­nese visi­tors go, and 2 to 3 mil­lion Chi­nese visit the US ev­ery year.”

In de­vel­oped coun­tries such as the United States and the UK, busi­ness and con­sumers con­tinue to turn to plas­tic to pay for goods and ser­vices. That re­quires com­pa­nies like UnionPay to process the trans­ac­tion and deduct money from one ac­count and trans­fer it to an­other.

In its re­cent busi­ness de­vel­op­ment, UnionPay has ag­gres­sively forged part­ner­ships with bank card is­suers and pro­ces­sors around the globe, and, buoyed by net­work rec­i­proc­ity agree­ments, its cards are now ac­cepted by more than 26 mil­lion mer­chants, putting its brand ac­cep­tance on a par with US- based Visa and Master­Card.

The global pay­ment-card mar­ket gen­er­ated $17.26 tril­lion in pur­chase value in 2014, ac­cord­ing to Pack­aged Facts. Trans­ac­tions us­ing UnionPay cards to­taled $5.92 tril­lion in 2014, which rep­re­sented 34.3 per­cent of the mar­ket. Visa (27.6 per­cent), Master­Card (19), Visa Europe (11.2) and Amer­i­can Ex­press Co (5.9) fol­lowed CUP in the ninth edi­tion of Pack­aged Facts’ Com­mer­cial Pay­ment Cards: US and Global Mar­ket Trends.

Ge said one way for UnionPay to ex­pand its brand is to be­come the pay­ment of choice for the grow­ing num­ber of Chi­nese tourists who travel over­seas. Ac­cord­ing to the China Tourism Re­search In­sti­tute, China had 61.90 mil­lion out­bound visi­tors in the first half of 2015, an in­crease of 12.1per­cent com­pared with the same pe­riod in 2014.

Such a strong in­crease in the tourism in­dus­try is a very im­por­tant mar­ket for UnionPay’s over­seas busi­ness de­vel­op­ment, Ge said.

Not­ing that new US visa rules are stim­u­lat­ing the num­ber of Chi­nese vis­it­ing the US, Ge said he is op­ti­mistic that UnionPay will be­come a pay­ment method of choice for many of those tourists.

“We pro­vide ser­vices wher­ever Chi­nese visi­tors go, and 2 to 3 mil­lion Chi­nese visit the US ev­ery year,” he said. “We will con­tinue to pro­vide pay­ments ser­vices for them. Our ul­ti­mate goal is to be used around the world.”

Like con­sumers else­where, Chi­nese are us­ing al­ter­na­tive pay­ment meth­ods in­stead of cash, with the mo­bile-pay­ments sec­tor in par­tic­u­lar ex­pe­ri­enc­ing huge growth, and Ge said that means UnionPay needs to em­brace tech­nol­ogy.

“We must in­no­vate, es­pe­cially in terms of mo­bile and on­line pay­ments,” he said.

In ex­pand­ing over­seas, Ge wants UnionPay In­ter­na­tional to fo­cus on a spe­cific mar­ket and tai­lor its ser­vices to that mar­ket: “In the US, our fo­cus is on get­ting more merchant ac­cep­tance of our prod­ucts and ser­vices. While in South­east Asia, we fo­cus more on card is­suance.”

Our ul­ti­mate goal is to be used around the world.”

Ge said UnionPay is pre­pared to pursue growth through what he called a “leapfrog de­vel­op­ment’, which may in­clude ac­qui­si­tions and part­ner­ships.

“It will definitely be one of our fu­ture ap­proaches as the busi­ness grows. But the de­tails will be com­pli­cated and this will not be easy,” he said. “For ex­am­ple, safety re­view is very strict for some coun­tries such as the US. The Trea­sury depart­ment is very strict about safety re­view.”

UnionPay and its com­peti­tors han­dle a great deal of cus­tomer fi­nan­cial in­for­ma­tion that is cru­cial to pro­tect, es­pe­cially against cy­ber at­tacks.

Ge said UnionPay is aware of cybersecurity threats lurk­ing in the sys­tem.

“We urge our mem­ber banks and pro­cess­ing net­works to ad­here to rules and reg­u­la­tions that are de­signed to stop the unau­tho­rized ac­cess to fi­nan­cial in­for­ma­tion,” he said.

Ge said UnionPay is em­brac­ing the trend of em­bed­ding mi­cro­pro­ces­sor chips in credit cards, debit cards and mo­bile phones. “All of our new cards is­sued af­ter Jan­uary 1, 2015, will uti­lize this tech­nol­ogy,” said Ge.

He ac­knowl­edged that pro­tec­tion of per­sonal fi­nan­cial in­for­ma­tion is be­com­ing a con­cern of con­sumers and busi­nesses.

“There must be se­cu­rity when pro­cess­ing fi­nan­cial trans­ac­tions, and we have done re­search on com­par­ing the mi­cro­pro­ces­sor chips and the pre­vi­ous mag­netic belt. It is widely be­lieved that this new chip tech­nol­ogy will help much bet­ter to pro­tect ev­ery­one’s in­for­ma­tion,” he said.

Reuters con­trib­uted to this story.

Con­tact the writ­ers at paulwelitzkin@chi­nadai­lyusa. com

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