China’s bank card clearing market opened upITC newsletter

Jiang Xueqing and Wu Yiyao
Updated: Oct 30,2014 7:16 AM     China Daily
 
Top leaders’ decision means China UnionPay is poised to face competition.

China will widen its market for clearing services for bank card transactions, raising the level of opening-up in the financial sector, the State Council said on Oct 29.

At an executive meeting of the council, top leaders decided to allow domestic and foreign companies that meet the authorities’ requirements to apply to set up bank card transaction clearing institutions.

Currently, only China UnionPay Co, the national bank card association, is approved by the People’s Bank of China to provide clearing services for bank card transactions in the country.

Experts have been calling for another bank card association to be formed to compete with UnionPay.

Last year, Chen Jianguo, a member of the 12th National Committee of the Chinese People’s Political Consultative Conference, urged the government to build a new industry access system for bank card transaction clearing institutions and to improve the regulation system for such institutions.

The current model could no longer meet the increased demand for innovations to the payment system and even hindered the system’s improved efficiency, Chen said.

Zhong Wei, a professor of finance at Beijing Normal University, said, “The State Council’s decision means that a number of foreign institutions, such as Tokyo-based credit card company JCB International—and not just Visa and MasterCard—will enter the bank card transaction clearing business in China.

“Apart from this, domestic financial institutions are likely to form a new payment service provider, which can compete with China UnionPay.”

The decision will also increase competition among bank card issuers and squeeze China UnionPay’s market, Zhong said.