June 10, AtoZForex – The People’s Bank of China (PBOC), China’s primary bank regulator, has finally allowed the qualified foreign entities to enter the card payments market. China is finally ready to open up its giant payments card market to foreign companies. Soon the Chinese residents will meet Visa and MasterCard in China Payments market.
China’s payments card market
China holds huge volume in consumer card transactions, for example, last year the whole amount of bank card transactions was over 55 trillion yuan. This number accounts for 48 percent of total social consumption. What is more, projections say it China’s market has the potential to become the biggest card market in the world by 2020.
The biggest share of card market in China belongs to the effective government-run monopoly China UnionPay CO Ltd. The monopoly firm has accumulated over 80 percent of debit cards, which corresponds to 72 percent of total transaction value in 2014. China has promised to loosen the monopoly’s grip after WTO stated in 2012 that US companies are being discriminated in the market.
Visa and MasterCard’s attempt to enter China took a decade
Foreign entities, such as Visa and MasterCard have been trying to enter China’s card payments market for more than a decade. The reason for such an insistence is an attractiveness of China’s market. Finally, People’s Bank of China has decided on permission for both of the foreign firms to enter the market. One of the companies, Visa, has commented on the matter:
“We are reviewing the new regulations and look forward to the opportunity to formally submit our license application for early consideration.”
The MasterCard spokesman Seth Eisen believes that this decision is a vital step for the company. He has also shared his opinion in the email:
“We’re ready to build on our partnerships with local banks, consumers, businesses and government.”
China’s payments card market requirements
The People’s Bank of China requires foreign players to hold 1 billion yuan, which accounts for $152 million, in the registered capital in a local company. Additionally, in order to get the license from China’s main bank, outside companies should be based locally and fulfill the cybersecurity standards.
As for Visa and MasterCard in China Payments market presense,the rules for foreign entities entering the market have been published this Tuesday. Following the requirements, firms that apply will have their applications reviewed by the central bank. The decision-making process will take 90 days. The successful applicants will have a year to set up a business. The central bank stated in Q&A published after the rules have been released on Tuesday:
“In the future, there will be more diverse participants in the domestic bank card market, with many bank card brands competing on a level field.”
The accepted applicants also will be able to acquire domestic card clearing firms. This will require them to pass the security review, as reported by the central bank.
Think we missed something? Let us know in the comments section.