Mastercard has obtained preliminary approval to create and operate bank cards in RMB. Mastercard’s activity in China is gaining access to the $27 trillion payments market (2018) as part of the financial opening of China. The new Mastercard project is a joint venture with NetsUnion Clearing Corporation (NUCC), a Chinese company that operates a payment platform for foreign companies. The preparation must be completed within one year for Mastercard to apply to the People’s Bank of China for formal approval of the start of operations.
Chinese payment market
China’s payments market is a valuable target for MasterCard. Until now, the payment market in China has been dominated by a local player, Union Pay, which is present in 177 countries and has issued over 100 million bank cards.
In China, cash payments have been almost completely displaced. The main use of payments is via WeChat or Alipay. For some time now, Alipay payments have also been available to foreigners who do not have a Chinese bank account or a Chinese SIM card.
At the end of 2019, China had 8.2 billion bank cards, with 90% of the debit cards. At the end of 2020, the volume of mobile third-party payment transactions is estimated to be worth 331.4 trillion RMB.
China financial opening
China is opening its financial market to foreign companies. Beijing is gradually easing start-up rules for external bank card providers to allow foreign firms to set up fully-owned operations to run insurance businesses, asset management, and investment banking. The change of rules is related to the first phase of the trade agreement between the US and China. The deal suggests that the new regulations could allow US payment companies to enter the Chinese payments market more easily than ever before.
Mastercard established a representative office in China in early 1988 when bank cards barely existed in the country. But since then, he’s had trouble accessing bank card users. Now, Mastercard has a chance to make his mark in China.
At that time, the company waited more than a year for Beijing to approve its operations. Currently, under the trade agreement, Chinese regulators have no more than 90 days to process applications from electronic payment service providers such as Visa or American Express.
Not only Mastercard will appear in China
American Express also overcame an obstacle to accessing the Chinese market after the People’s Bank of China accepted its application to start a bank card clearing business last month.
Due to regulatory liberalization, Amex and PayPal are also planning their entry strategy into the payments market in China.
Visa is still waiting for the Chinese government to approve its operations.