Visa Eyes China, Prepares To Take On UnionPay

by Sarah Grotta 0

 Nearly two years ago, China decided to let other non-China based payment solutions into their massive market. The card networks are looking to create inroads in this highly digitized market, but going against China UnionPay creates a challenge. As an article in Payments Week points out, China UnionPay is in a tough spot too, and will need to carefully navigate it new competitors.

The sheer size of the Chinese mobile payments market is too sweet a prize for any mobile payments processor to not want to make at least some kind of run at. Several have tried, but results so far have been sketchy at best. Now, Visa’s going straight to the source, and filing an application with the People’s Bank of China (PBOC) to be the first payment network with a bank card clearing license that didn’t originate in China.

So what will PBOC’s response to this be? If it lets Visa in, it risks slitting UnionPay’s throat by letting a competitor into the one market segment where UnionPay is top dog. If it keeps Visa out, then it looks like a protectionist stroke, a move that’s not going to be well-accepted by the business community at large. If UnionPay wants to take on other markets, then it’s likely going to have to demonstrate it can stand off competition on its own merits.

This isn’t a good situation for UnionPay, and the only way for it to survive long-term is to diversify out of China. Visa in China may make that a lot tougher, however.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

Read the full story here