China opens bank card clearing market
Print Edition
PAYMENT companies including Visa Inc, MasterCard Inc and Alipay are now allowed to apply for a license to provide domestic bank card clearing services after China’s central bank and banking regulator yesterday eased the curbs over bank card clearing operations.
Chinese and foreign firms can apply to become bank card clearing institutions and they will enjoy the same treatment in regards to qualification, procedure and operation management, said a statement on the website of the People’s Bank of China.
Only companies that have conducted payment or clearing operations for more than five years are able to apply for the license. The central bank will process the application and inform the applicant within 90 days on the status.
China UnionPay is currently the only approved entity to provide clearing services for bank card transactions in the Chinese mainland.
The relaxation is set to “push forward a secure and efficient mechanism for bank card clearance, fasten the pace of financial innovation and enhance the system’s risk control abilities,” the statement said.
The move follows regulations issued by the State Council in April last year.
China promised to reform its payments clearing market in 2012.
At an executive meeting of the State Council in October 2014, China decided to allow domestic and foreign companies, which met certain requirements, to apply to set up bank card transaction clearing institutions.
Clearing companies connect banks, shops and card users, and settle transactions by turning the promise of payment into actual transfer of money from one bank to another. Their profits come mainly from commission.
Dennis Chang, division president of China at MasterCard, said the US company is “ready to build on partnerships with local banks, consumers, businesses and government to drive economic growth that benefits all.”
Market insiders believe foreign penetration will further elevate competition in the business as third-party payment companies, Alibaba’s Alipay in particular, which offer convenient and free online payment services, are already eating into the user base of traditional card transactions.
Visa, MasterCard, American Express and other foreign bank card operators have been jockeying for a greater share of the business for years. Credit cards have room to grow in China.
There were 5.4 billion bank cards issued by the end of 2015, with total annual spending of 55 trillion yuan (US$8.4 trillion).
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