US-based payment card companies, including American Express, MasterCard and Visa, are preparing to submit license requests to operate in China within months, three people with direct knowledge of the matter said.
However, the long wait for the US firms is unlikely to end soon. It might take at least two years for the companies to clear all official scrutiny, including from banking regulators, and to pass a security review, as well as meeting other conditions, the sources said.
US payment network operators have been waiting for more than a decade to get access to China, which is set to become the world’s largest bank card market by 2020, when the number of cards in circulation is forecast to rise to 9 billion from 6 billion last year, research firm GlobalData PLC said.
China in 2015 first agreed to open the card market to local and foreign businesses, a move triggered by a 2012 WTO ruling.
However, foreign card companies have been unable to set up local operations in the absence of a clear road map from Chinese authorities.
In May, Beijing and Washington agreed to a July 16 deadline for China to issue “necessary guidelines” for the launch of local operations by US payment network operators, leading to “full and prompt market access.”
The central People’s Bank of China (PBOC) issued the guidelines on June 30, three people familiar with the matter and a copy of the document reviewed by reporters said.
The expected entry of foreign card companies is to challenge the dominance of state-backed China UnionPay Co Ltd (中國銀聯), the sole operator in a yuan bank card payment network worth more than US$8 trillion in China.
“It’s exciting that the uncertainty is finally over and they have finally come out with the rule book, but it’s not going to be a fast and smooth journey,” one of the people with knowledge of some of the US payment companies’ plans said.
The people said the applicants would be subject to intense scrutiny by the banking regulator as well as security agencies. They would also have to set up extensive local infrastructure.
An American Express spokesman said it would apply for a license as soon as possible.
“The PBOC’s guidelines clearly set forth the process ... and we’re continuing to work with different regulators as we move through this process,” he said.
A spokeswoman for Visa declined to comment, citing the quiet period ahead of the announcement of the company’s quarterly results. MasterCard did not immediately respond to request for comment.
The PBOC declined to comment in response to faxed questions.
Under the conditions laid out by the central bank, all payment companies would have to set up technology and data infrastructure and a backup data system within China.
This is a concern for the foreign payment network operators, which fear this could result in internal systems being put under surveillance and could make it difficult to maintain the confidentiality of proprietary data, industry insiders familiar with the situation said.
Some insiders have also expressed concerns about whether China would provide a level playing field for foreign companies, which could significantly affect the market share of UnionPay, set up in 2002 by the PBOC and the Chinese State Council.
UnionPay has also been expanding its overseas operations and has a presence in more than 160 countries including the US, while MasterCard and Visa have been waiting to offer yuan-denominated cards for years.
UnionPay’s share of the global credit-card market rose to 25 percent in 2015 from 13 percent in 2010, drawing level with MasterCard, but lagging Visa’s more than one-third market share, according to Euromonitor International.
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