China Loosens Up On Foreign Payment Networks

When it comes to imposing stringent licensing restrictions on foreign bank card providers, it seems as though China is taking a more relaxed attitude.

A senior central bank official said China has no plans to limit the number of licenses issued to overseas providers attempting to enter the country’s $7 trillion card payment market, Reuters reported yesterday (Nov. 10).

If the use of limited licenses were actually imposed for foreign bank card providers, these companies would have no choice but to utilize joint ventures with local partners in order to operate within the country.

But in a conference yesterday, Fan Yifei, a vice governor at the People’s Bank of China (PBOC), confirmed that such requirements are not in the works.

“We will actively and cautiously open up China’s card payment market according to laws and regulations and encourage fair competition,” Fan said.

Following a World Trade Organization ruling in 2012, China was forced to break the monopoly held by Chinese payment network UnionPay by introducing new rules for foreign payment networks, which came into play as of June 1.

This move opened the door for companies like Visa and MasterCard to finally have an opportunity to break into a market that Bloomberg previously estimated handled nearly $73 trillion in 2014.

“Realistically, Visa and MasterCard are not going to be the dominant card networks in China in the near future,” said Tristan Hugo-Webb, associate director of global payments at Mercator Advisory, to Financial Times earlier this year.

“Nonetheless, even a small share of the fast-growing Chinese electronic payment market will be a big boon for Visa and MasterCard as they increasingly face competition from other players in the global payments marketplace.”

For now, the state-controlled consortium UnionPay maintains its monopoly control over the payment cards issued and used within China.

“As China opens up its market, more institutions will enter interbank clearing market. UnionPay will compete and collaborate with new joiners,” Reuters reported Ge Huayong, chairman of China UnionPay, said following Fan’s statement at the same conference yesterday.

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