Bank card market sees increased comeptition
As a result of China’s accession to the WTO, foreign financial institutions and bankcard issuers can operate yuan businesses in China starting on December 11, 2006. With Chinese card usage reaching to one tenth of total retail sales across the country, competition over the debit card and credit card market is expected to become more intense in the next few years. According to vice-chairman of China People’s Bank Su Ning, the use of bankcards on the Chinese Mainland has matured in recent years. By June 2006, there were 1.033 billion bankcards issues, 700,000 POS units and 90,000 ATM terminals across the country. In the first half of 2006, bankcard transaction volume totaled 29 trillion yuan (US$3.625 trillion). Excluding large wholesale and real estate transactions, the use bankcards reached 10% of the total retail volume of consumer goods. China now has three types of bank cards issued, debit card, quasi-credit card and credit card, with 96%, 3% and 1% shares of the market respectively. After the reaching 100-million issuance benchmark in 1999, its annual growth in number was 100 million. Credit cards could be found on the Chinese Mainland starting in 1995, which was ten years later than the first issuance of debit cards. However, since various commercial banks have launched reforms on their credit card operations and management structures, there has been a rapid expansion in credit card market. In the first six months of 2006, China’s total use of credit card amounted to 136 billion yuan (US$17 billion) with average consumption per card 17.5 times higher than that of debit cards. Although the finance sector is still in the transitory period until it is fully opened, multinational bankcard issuers have actually started to penetrate Chinese market. Main international brands have seen a tremendous growth in China. By acquiring stakes from domestic institutions and establishing joint ventures, these international card issuers are able to introduce their products and services to the market very quickly. McKinsey & Company estimated that China’s credit card market would generate 13 to 14 billion yuan (US$1.625 billion to 1.75 billion) of profit by 2013. By 2010, the profit generated by the credit card market on the Chinese Mainland may exceed US$5 billion by 2010 after the market is fully opened. A more market-oriented finance market enables financial institutions to offer more diverse services. This also comes at a cost on the part of the consumers. In addition to China UnionPay’s cards, Visa, Mastercard and American Express are also gaining popularity. Among the major bank issuers, China UnionPay charges the least, then Visa, Mastercard and American Express respectively. For inter-bank transaction enquiry at ATM terminals, Visa charges 1.2 yuan and Mastercard 1.5 yuan. After adopting free-of-charge policy for four years, China UnionPay started administrative charges in 2006. Bankcard is not only promoted in urban centers but rural areas as well. Agricultural Bank of China, Minsheng Bank and Industrial and Commercial Bank of China have started to launch featured bankcard services to seven secondary locations including Guizhou, Sandong and Chongqing. They plan to extend the service to five other provinces including Sichuan and Shaanxi.