For­eign cards on hori­zon, may woo Chi­nese users

China Daily (Hong Kong) - - BUSINESS - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

For­eign debit and credit card com­pa­nies face a long fight with lo­cal elec­tronic pay­ment mar­ket leader UnionPay as in­dus­try su­per­vi­sion is still evolv­ing and cus­tomer needs are di­verse, ex­perts said.

US card net­work Visa has ap­plied for a li­cense from China’s cen­tral bank to op­er­ate in the Chi­nese mar­ket, it said in an email on Fri­day.

MasterCard, an­other US-based card com­pany, is also pre­par­ing to ap­ply for a li­cense, it said in an email.

If they re­ceive the li­censes, Visa and Mastercard are ex­pected to take a share of the Chi­nese yuan-de­nom­i­nated bank card pay­ment mar­ket, which is cur­rently dom­i­nated by the State-backed com­pany that was set up in 2002.

Their li­cense ap­pli­ca­tions fol­low the cen­tral bank’s up­dated guide­lines for for­eign card com­pa­nies seek­ing to op­er­ate in China, which were an­nounced dur­ing the Chi­naUS di­a­logue in June.

The Peo­ple’s Bank of China up­dated the guide­lines by the end of June, ac­cord­ing to an in­dus­try in­sider who is fa­mil­iar with the mat­ter.

China agreed to open the card mar­ket to for­eign com­pa­nies in 2015.

The strate­gic re­search firm RBR said in the news re­lease in July that UnionPay is likely to face more com­pe­ti­tion from for­eign com­peti­tors as it strives to main­tain its high mar­ket share.

Any en­try by for­eign card gi­ants would, how­ever, have only a mi­nor im­pact in the short run, ex­perts said.

“Sub­mit­ting ap­pli­ca­tion is only the first step. It may take long to get the fi­nal ap­proval,” said Dong Ximiao, a se­nior an­a­lyst at Ren­min Univer­sity of China.

“Once they en­ter, for­eign com­pa­nies need to adapt to Chi­nese su­per­vi­sion and need to be pre­pared to meet the re­quire­ments of bank­ing reg­u­la­tors.”

For­eign card com­pa­nies are ex­pected to come un­der strin­gent over­sight in the lo­cal mar­ket, ac­cord­ing to Dong.

Echo­ing his re­marks, Zhao Yao, vice direc­tor-gen­eral of the Fi­nan­cial In­no­va­tion Re­search Cen­ter, which is part of the China Univer­sity of Po­lit­i­cal Science and Law, said it is hard to shake the dom­i­nance of UnionPay, in terms of do­mes­tic bank card clear­ing ser­vice.

The ex­pected en­try of for­eign play­ers would pro­vide more busi­ness op­por­tu­ni­ties and ex­pand their co­op­er­a­tion with Chi­nese banks, ac­cord­ing to Zhao.

He said Chi­nese cus­tomers’ strong ap­petite for co-branded cards has the po­ten­tial to gen­er­ate prof­its for for­eign com­pa­nies in fu­ture.

In fact, some com­pa­nies have al­ready started work­ing with Chi­nese banks.

For in­stance, MasterCard has is­sued sin­gle-branded EMV debit card in China with Bank of China, and a World card with ICBC, tar­geted at their af­flu­ent cus­tomers, ac­cord­ing to MasterCard CEO Ajay Banga.

Li Ai­jun, a law pro­fes­sor at the China Univer­sity of Po­lit­i­cal Science and Law, said as more for­eign com­pa­nies en­ter, the ma­jor ben­e­fi­ciary will be Chi­nese cus­tomers, with more card op­tions to choose from.

Once they en­ter, for­eign com­pa­nies need to adapt to Chi­nese su­per­vi­sion and need to be pre­pared to meet the re­quire­ments of bank­ing reg­u­la­tors.” Dong Ximiao, a se­nior an­a­lyst at Ren­min Univer­sity of China

Zhuang Qiange con­trib­uted to the story.

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