• Phase I (1985 to1993) – Emergence of  Credit Cards
  • “The Big Four” (top state-owned banks) started issuing the first credit cards in Chinese history
  • International card schemes entered China
  • “On-us,” regional acceptance network of these banks started emerging
• Phase II (1994 to1999) – Emergence of Bankcard Industry 
  • Rapid growth of debit cards and quasi credit cards
  • Golden Card Project was launched as China’s first attempt to build a national acceptance network
  • First bankcard law was introduced in 1999
• Phase III (2000 to 2006) – Rise of China UnionPay 
  • 2001: People’s Bank of China (PBOC) held the first national bankcard industry conference.
  • 2002: China UnionPay (CUP) was established as the operator for the first national acceptance network
  • CUP fully established its network standards/policies and national acceptance infrastructure by 2004.
  • Recognizing credit cards as a strategic offering, Tier I and Tier II banks formed separate business units for their credit card operations.
  • Foreign banks started entering issuing market by forming joint ventures with local banks.
  • While CUP secured its position as the national card scheme, it also started developing an overseas acceptance network in 2006. Chinese regulators required all bankcards used for domestic or RMB transactions to carry the CUP logo.
• Phase IV (2007 & Beyond) – Globalization & Conflicts
  • December 2006: For the first time, foreign banks are allowed to issue RMB cards without forming JVs with local issuers.
  • 2007: The Chinese government issued a new regulation allowing foreign ownership in payment acquiring entities.
  • CUP expanded its oversea acceptance network to 95 countries.
  • 2010: Visa banned its member banks from routing foreign transactions derived from Chinese Dual Logo Cards to CUP network.

Major Players

China UnionPay (CUP) – Established in March 2002, CUP is the operator of a national acceptance network under the CUP brand. The Shanghai-headquartered CUP currently has about 300 domestic and overseas associate members, and it functions as national inter–bank authorization switch and clearing & settlement center.

Tier I Banks – Also called “The Big Four,” they are the four largest state-owned banks in China. They include: Bank of China, China Construction Bank, China Agriculture Bank and Industrial & Commercial Bank of China. The four control about 70% of total bank assets in China. Before the establishment of CUP, these banks controlled most of the domestic inter-region e-network and international transaction switches. They remain as the largest issuers and acquirers in China, although CUP integrated their networks into CUP’s national acceptance network and ended their dominance in the bankcard market by providing middle- and small-sized banks with direct point of sale (POS) connectivity to the CUP network.

Tier II Banks – This group consists of six nationwide commercial banks (Communications Bank, CITICIB, Everbright Bank, Merchants Bank, Mingshen Bank, Huaxia Bank) and regional commercial banks (Shezhen Development Bank, Shanghai Pudong Development Bank, Guangdong Development Bank, Industrial Bank). These banks generally have healthier balance sheets and are more innovative in their bankcard offerings as compared to the state-owned banks.

Tier III Banks – This includes close to 150 locally operated city commercial banks. Since 2005, some city commercial banks have diversified their shareholders by inviting both Chinese and international companies to take minority ownership, merging or cross-shareholding. Some of the banks have listed their shares. 

Foreign Banks: 180 foreign banks today have a presence in China, but only a few have sizable operations in retailing banking. Bank of East Asia, HSBC, Citi Bank, Woori Bank of Korea, etc., have issued debit or credit cards in China.

    •    For every 10 debit cards, there is only 1 credit card
    •    There is only one POS for every 838 Chinese, and one ATM for every 9,788 Chinese
    •    Number of Chinese Google search results for CUP in 2002 was 0, but there are already 3,360,000 results as of July 2010. CUP’s brand recognition rate among Chinese consumers is 99%.
    •    HSBC, considered the most successful foreign bank in mainland China, has 101 branches in China. That’s compared to more than 10,000 branches owned by Bank of China.