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China’s UnionPay Enters Europe’s Payments Market

The largest card issuer in the world, China UnionPay, has slipped into the European market, offering credit and debit cards throughout the continent.

Thanks to its new partnership with the UK-based startup, Tribe Payments, UnionPay began in June allowing banks and other financial institutions to begin offering people and businesses its branded credit cards.

Now European corporate customers that conduct business in China will have the option of using UnionPay, which has issued more than six billion cards in the country, there.

Details About UnionPay

In 2002, UnionPay was founded under a charter from the People’s Bank of China. Since its beginnings, it has had a monopoly on domestic bank card payments. In fact, it has issued more cards than Visa and Mastercard has done together.

During the last few years, UnionPay has made an effort to expand into other countries, but mainly made most inroads in Asia. According to the Chinese issuer, more than 41 million merchants, two million ATMs in more than 150 countries with about than 25% of them located in Europe accept UnionPay cards.

About 10 years ago, UnionPay made its first move into Europe, so that Chinese tourists had a way to use their cards. A few years later, Harrods, London’s infamous department store, installed point of sale terminals that could accept UnionPay cards, prompting an influx in sales from tourists and others from China.

Why UnionPay’s Move Makes Sense

Competition from digital payments groups, like Alipay and WeChat Pay, have forced UnionPay to up its game. Since they have begun dominating the online market, UnionPay has suffered. It has lost income from fees, as well as important transaction information from shoppers who have ditched their cards for smartphones.

A Closer Look at the Move

Since UnionPay will be expanding to Europe with third parties handling the issuing and other financial technology companies, like its new partner Tribe, handling the payment processing, it did not need to go through any other red tape to move ahead.

This move also further frustrates the U.S.-based card networks, which have been unable to slip into the huge Chinese market. Both Visa and Mastercard have tried to obtain licenses to expand into China, but its central bank in Beijing has never given them any thought.

It’s an unfair situation since Visa and Mastercard work just like UnionPay. The Chinese issuer gets to collect a fee every time the card is used. However, Beijing will not recognize them, and that is despite a ruling issued by the World Trade Organization that found that China discriminated against overseas payment groups.

In Conclusion

With this move, it will be interesting to see how the other card networks respond. Visa and Mastercard have already made acquisitions their strategies to stay competitive in an environment that is moving in the direction of digital payments.

Tensions between the U.S. and China likely won’t make anything better anytime soon. The two countries have been a vicious trade war for the last several months. Though Trump announced this weekend that he Chinese president Xi Jinping are talking again in an effort to avoid an escalation of their trade war. Trump said he would not levy 25% tariffs on $300 billion in Chinese exports to the U.S. while they continue to talk.

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