| HONG KONG
HONG KONG May 12 The prospects for global
payment network operators including Visa Inc and
MasterCard Inc at last entering the Chinese market remain
uncertain, even after the United States and China moved towards
starting a licensing process for them.
As part of a plan to reduce a massive U.S. trade deficit
with China, the world's two largest economies have agreed to
expand trade in some sectors and increase access to China for
Under a framework announced on Friday, China is likely to
issue further "necessary guidelines" by July 16 for the launch
of local operations by U.S. payment network operators, leading
to "full and prompt market access".
Foreign operators have been lobbying for more than a decade
for direct access to a Chinese market set to become the world's
largest bank card market by 2020. In 2012, the World Trade
Organisation (WTO) found China was discriminating against
foreign card companies.
Industry insiders said the foreign firms were likely only to
submit license applications if Chinese regulators address their
concerns on issues including onshore data protection and the
near monopoly of state-backed China UnionPay Co Ltd.
"We have been expecting this for a while now. We are not
sure how much of those issues will be resolved now," said a
senior executive at a U.S.-based payment network operator, who
didn't want to be named due to the sensitivity of the matter.
Any license application would likely take 6-7 months to be
approved by Chinese regulators, the executive said, adding it
could take another 12-18 months to set up all the infrastructure
and start local operations.
While the U.S. firms have been waiting to offer
yuan-denominated cards since the WTO ruling, UnionPay has
expanded well beyond China.
Set up in 2002 by China's central bank and State Council,
UnionPay had a 55 percent share in the global debit card market
in 2015, compared to 15 percent for Visa and 10 percent for
MasterCard, according to Euromonitor International.
In the global credit card market, UnionPay's share 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.
With UnionPay now in more than 160 countries, some industry
officials say its card has become a key tool for China to manage
the flow of cash outside the country.
One of the biggest concerns for U.S. payment operators is
whether they would have a level-playing field while competing
with UnionPay, where former Chinese central bank officials fill
several of its top jobs.
"No one expects to get 15-20 percent (China) market share in
the foreseeable future, but we hope there won't be barriers in
our efforts to get even low, single-digit market share to
justify the investments," the company executive said.
In response to Reuters request for comment, MasterCard said
it looked forward to having "full and prompt" access to the
Chinese market. Visa said it looked forward to submitting an
application and building its business for the long-term.
(Reporting by Sumeet Chatterjee, additional reporting by
Matthew Miller; Editing by Ian Geoghegan)