China Finally Accepts AMEX! American Express Becomes First Non-Chinese Company To Clear Card Payments In PRC

0
1123

China got AMEX-ed!

Just about a week back, prominent Chinese tech entrepreneur Jack Ma called the US-China trade war ‘stupid’ and explained  that if that doesn’t stop, it will be impossible to create new, valuable jobs in either country. And in an interesting development soon after (on Friday), American Express Co won an approval to clear card payments in China. This makes AMEX the first US-based card network to gain direct access in China. China has been projected to become the biggest bank card market by the year 2020.

Licensing relaxations ahead of G20 meet in Argentina

Recently, Beijing started allowing foreign companies to apply for licenses. The move comes in anticipation of the upcoming G20 meeting in Argentina, where it is speculated that the US and China will at least “try” to resolve their trade disputes. This approval is still in a preliminary stage, and there are limitations placed on applicants, such as:

a) Companies will be allowed to process and settle payments only in China’s prevalent domestic currency (Yuan) and not in US Dollars
b) Companies will need to work in sync with the central bank in China (The People’s Bank of China) or with organizations that are vetted and approved by it

Right now, the AMEX deal involves a 50:50 partnership with the Chinese LianLian Group. Their joint venture is named Express (Hangzhou) Technology Services Co. Express Tech is expected to complete preparing for operations and get a nod from the People’s Bank of China within a year from now, in order to start its card clearing business in the world’s most populated country. The People’s Bank called the move a “significant step toward opening up China’s bank card market to foreign investors”.

Before these approvals came into effect, the only way for card companies to allow payments within Chinese offline markets, was to tie-up with the state-owned Chinese payment consortium called “UnionPay”. Other card companies such as VISA and Mastercard have been trying for direct access to China for more than ten years! The number of cards in circulation in China is expected to rise to 9 billion by the year 2020 (China had 6 billion cards as per a 2016 survey, Source of data: Globaldata PLC). Both VISA and Mastercard, in addition to Apple Pay, currently rely on UnionPay based payments for their Chinese operations. What gave AMEX the edge over VISA and Mastercard (VISA had applied for direct access in 2017), appears to be the healthy local equity ratio in its joint venture.

LEAVE A REPLY

Please enter your comment!
Please enter your name here