In news that will excite American payment processors, China is for the first time allowing foreign companies to fully bring their payments processing networks to the country. This means that processors such as MasterCard and Visa can now make preparations and launch their programs in China.
In the past, it was near impossible for payment processors outside of China to do business in the country because the laws did not permit it. Consumers could use processors such as MasterCard and Visa, yes. However, you would be charged a hefty fee by a government approved company called UnionPay to process transactions. This posed a major obstacle for consumers, resulting in only a small portion of the population using such foreign payment processors. In fact, all Chinese Visas and MasterCards had to be co-branded with UnionPay.
However, China recently passed new regulations that replaced the old laws with new ones that allow external payment processors to conduct business in the country. The details of regulations remain scarce, but sources indicate that major American processors such as American Express, MasterCard, and Visa received the news with a lot of excitement.
China, with a population of more than 1 billion people, represents a huge market for any payment processor. In the past few decades, the country has been spending trillions of dollars on its own credit and debit cards with the aim of getting many people as possible to take the leap into digital payment. The initiative has been successful and the entry of bigwigs such as MasterCard and Visa can only make things better.
China is currently the world’s second-largest economy. In 2013 alone, Chinese consumers spent a whopping $5.2 trillion on UnionPay’s network. Visa handled just about $1.7 trillion more within the same period. This shows just how much companies like Visa could benefit from the new payment regulations in China.
China’s payment industry has been a sore between the two countries (the U.S. and China) for quite some time. Just three years ago, the WTO ruled that UnionPay was a government sanctioned monopoly and urged the country to provide a better environment to allow for healthy competition in the payment sector. This could be one of the major moves as the country clears the way for meaningful competition.
For retailer looking to take advantage of the new regulations by accepting more Chinese customers in the future, you need to start y getting a high risk merchant account.