China’s government indicated that it plans to end a monopoly in bank-card clearing from June, paving the way for companies such as MasterCard Inc and Visa Inc to get a foothold in an industry that handles US$73 trillion per year.
Rules published yesterday by the Chinese State Council allow for foreign firms to obtain licenses for such businesses by setting up units or acquiring local players. They take effect on June 1, China’s Cabinet said on its Web site.
China UnionPay Co (中國銀聯) has previously been the sole clearing service provider for yuan-denominated bank-card payments.
China’s market opening would represent a “huge opportunity” for US payment networks, FBR Capital Markets analyst Scott Valentin said in October last year, when the government indicated that it planned to end UnionPay’s monopoly.
The WTO told the Asian nation in 2012 to stop discriminating against foreign payment firms, a group that includes American Express Co.
China had 4.9 billion bank cards at the end of last year, according to the central bank. The value of credit and debit card transactions totaled 449.9 trillion yuan (US$72.6 trillion) last year, it said in a statement yesterday, adding that about 48 percent of retail sales were paid through bank cards, up from 4.7 percent in 2002.
Extra competition will mean better service and more convenience for consumers, the People’s Bank of China said.
Under the rules, institutions applying for clearing licenses must have at least 1 billion yuan of registered capital. Foreign firms must set up Chinese units and get licenses if they provide such services for domestic clients.
The State Council said that, while a license is not required for firms clearing foreign currency-denominated cross-border transactions, overseas companies will need to register with Chinese banking regulators.
Established in 2002 in Shanghai by the State Council and the central bank with shareholders including major Chinese banks, UnionPay has more than 4.6 billion bank cards in circulation, with a network across more than 150 countries, according to its Web site.
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