The government of China have indicated their plans to end their bank-card clearing monopoly in the country from June of this year, allowing foreign companies such as MasterCard Inc and Visa Inc to move in on the Chinese domestic market which handled US$73 trillion in transactions last year.
A new set of rules were published in late April by the Chinese State Council which set out how foreign companies could go about obtaining licenses. The rules are set to come into effect on June 1st, that is according to the China Cabinet website.
China UnionPay have so far been the sole clearing service provider for yuan-denominated card payments in the domestic Chinese market.
China we’re told by the World Trade Organisation back in 2012 to stop discriminating against foreign payment providers.
According to China’s central bank, the domestic Chinese market had some 4.9 billion bank cards at the end of last year. The total value of card transactions totalled some 44.9 trillion Yuan ($72.6 Trillion USD) last year.
Extra competition within the domestic payment market is hoped to bring in better service and more convenience for Chinese customers, the People’s Bank of China said.
Under current rules, financial institutions applying for clearing licenses within the country must have at least 1 billion yuan of registered capital. For foreign firms, they must set up Chinese entities and obtain licenses for these if they intend to provide clearing services domestically.
The State Council said that whilst a license was not required for firms engaged in the clearing of foreign currency-denominated cross-border transactions, overseas companies will still be required to register with domestic banking regulators.