China is an excellent market for credit cards, but the trick is to get the necessary licensing. If the firm is based in New York or San Francisco, it won’t come easy.
This article talks about the quixotic effort to get into the Chinese credit card market.
-
Visa, Mastercard and American Express have been campaigning to enter China for years. After more than a decade of trying, they may have missed their chance.
-
Beijing has repeatedly signaled it will open up foreign access to its credit card market, and in 2017 it opened the door for American card companies to apply for licenses.
-
But those applications are still under government review, and there’s scant insight on when, or if, they’ll be pushed along, especially amid the broader trade war with the United States.
-
Meanwhile, state-controlled China UnionPay has solidified its hold on the bank card industry. And mobile payments have skyrocketed, dominated by services from rival powerhouses Tencent and Alibaba.
In some ways, MC and Visa are a day late and a dollar short, but it is not due to a lack of trying.
-
When China joined the World Trade Organization in 2001, it indicated that it would remove restrictions on foreign payment processors by 2006.
-
But that deadline came and went. In 2010, the United States filed a WTO case against China over its treatment of US card companies.
-
It won the case two years later. Still, China continued to drag its feet.
-
Beijing later said it would permit foreign companies to clear domestic payments, but the application process still wasn’t clear when President Donald Trump and Chinese President Xi Jinping met at Mar-a-Lago in the spring of 2017.
Ironically, American Express is ahead of the game.
-
American Express appears to be furthest along.
-
The company confirmed to CNN that its application was formally accepted by the People’s Bank of China, China’s central bank, as previously reported by the Wall Street Journal.
-
This move is viewed as an important step on the path to receiving a provisional license.
-
American Express applied for its license as a joint venture with Lianlian Group, a Chinese payment services company.
Missing a the chance for early adoption puts you at a long term disadvantage.
- Merchants in China like these mobile payment apps, while rely on QR codes and are easy to accept, according to Mercator Advisory Group analyst Sarah Grotta.
- “For merchants to then change to something where they would have to accept a more traditional magnetic stripe or chip card … could be a struggle or a significant expense,” Grotta said.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group