Posted by: mulrickillion | December 4, 2011

China Sidelines MasterCard, Visa / 万事达、Visa 的中国困境

Economic Observer, 2011-11-17 —

Summary:A ban on providing yuan-denominated cards has left Visa and MasterCard powerless in the world’s fastest-growing market.

By Hu Rongping(胡蓉萍)

Corporation, page 20

Issue No. 542, Oct. 31, 2011

Translated by Li Meng (李萌)

Original article: [Chinese]

Visa and MasterCard process around three quarters of card transactions in Europe and the U.S., but the ban on providing yuan-denominated cards has left them powerless in the world’s fastest-growing market.

Almost all of China’s 2.4 billion cards bear the logo of China UnionPay, a payment system launched by the central bank in 2002. Unable to offer cards to the vast majority of Chinese who only make purchases domestically, Visa and MasterCard are hoping to make their case in China by showing the superiority of their technology.

MasterCard sent Chief Technology Officer Garry Lyons on a recent visit to China with a group of partners from across Asia. Its PayPass system, like Visa’s PayWave, is gaining popularity in Europe and the US, where shoppers can now wave their bank cards in front of sensors in order to make low-value transactions, for example when buying a sandwich in a cafe or a magazine at a newsagent.

Prior to that, the two American card companies developed a standard for payment cards with integrated chips. Most cards issued by western banks now use this technology, whereas many Chinese still rely on magnetic stripes, which have been on the reverse of cards since the 1960s.

Even so, some in the Chinese banking sector think that UnionPay is likely to remain dominant even if Visa and MasterCard fight harder for market share. 

"Technically speaking, China UnionPay isn’t lagging behind. Of course, further improvements are needed in the area of risk control. But in five years’ time, when UnionPay catches up in terms of risk control and international interoperability, it’s hard to say how much of an edge the two companies will hold if they’re allowed to access the Chinese card market." said a director at the credit card division of a major bank.

China does have its own version of the chip-card standard – developed by the People’s Bank of China and known at PBOC 2.0 – but hasn’t yet got an analogue to the contactless payment systems of PayPass and PayWave, leaving a gap that might benefit Visa and MasterCard. . . .

China Sidelines MasterCard, Visa – Economic Observer News- China business, politics, law, and social issues

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: