China opens its markets to foreign bank card companies

June 7, 2016 10:30 AM

China is to allow foreign payment card companies to operate in the country, potentially giving groups like Visa Inc and MasterCard  access to its 55-trillion-yuan ($8.4-trillion) card payment market.

Visa and MasterCard, the world's two largest credit and debit card companies, have been lobbying for more than a decade for direct access to China's cards market, which is projected to become the world's biggest by 2020.

Bank card consumer transactions reached 55 trillion yuan in 2015, accounting for 48% of total social consumption, the central bank said. Presently the market is dominated by state-run China UnionPay Co Ltd.

Rules issued on Tuesday by China's central bank and the China Banking Regulatory Commission include a requirement that applicants hold 1 billion yuan ($152.2 million) in registered capital in a local company.

The foreign bank card companies must also meet China's national security and cyber security standards and be locally based.

The payment card rules come more than a year after the State Council, China's cabinet, said China would allow foreign firms to operate bank card clearing businesses.

This aimed to address a 2012 ruling by the World Trade Organisation that found China was discriminating against U.S. credit card companies.

"In the future there will be more diverse participants in the domestic bank card market, with many bank card brands competing on a level field," the central bank said in a Q&A published after the release of the rules.

Qualified foreign companies can apply to set up bank card businesses by meeting the same standards and processes required by domestic companies, the central bank said in its statement.

Foreign investors are also allowed to acquire domestic card clearing firms after passing a security review, it said.

Once companies have submitted their applications, the central bank will have 90 days to decide whether to grant an approval. Companies that get a green light will have a year to set up their operations.

A Shanghai-based UnionPay spokesman said the company supported the rules and would compete with other firms fairly and by law under the same supervision.

Reuters could not reach Visa or MasterCard for comment after normal business hours.

($1=6.5699 Chinese yuan renminbi)

About the Author