China’s domestic payments market has been the antithesis of its international regime, representing an insular market in an era when mobile and digital payments technologies and cards are permeating further than ever before. While the world’s leading financial centers are all vying for RMB payments and execution, China itself has put up barriers for groups such as Visa and MasterCard – this may finally be coming to an end however.
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Given years of pent up demand, China is finally looking to open itself up to an entirely new payments market, with the advent of Visa and MasterCard. In the past, the biggest barrier has been licences that had to be garnered from the People’s Bank of China – the bank also stipulates that $152 million (1 billion yuan) must be held in registered capital locally, as well as being based locally, not an easy feat for most offshore emergent payments entities.
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The Chinese market itself is home to nearly $8.4 trillion (55 trillion yuan) in consumer card transactions, which only looks to grow in the years to come. By 2020, the country will overtake the US as the biggest card market in the world. Consequently, Visa and MasterCard, two of the largest card payments groups in the world, have been eyeing exposure into the Chinese domestic market.
All groups applying for licenses need to go through China’s central bank, which formally allows up to 90 days for a decision, while those achieving the requisite licensing agreements have up a year to set up operations. According to a Visa spokesperson in a recent statement to Reuters: “We are reviewing the new regulations and look forward to the opportunity to formally submit our license application for early consideration.”
In the past, China UnionPay has held sway in the market, capturing a virtual monopoly in the cards space – its reign took a huge dent back in 2012 after the World Trade Organisation (WTO) ruled that US firms were being persecuted in China, leading to a new emphasis on competition.