The world’s biggest bank card company has launched plans to expand beyond its native China and contend against international payment incumbents MasterCard and Visa.
Payment giant UnionPay has become the world’s biggest bank card group in terms of transaction value a mere 15 years after its founding, on the back of the monopoly position it enjoys as a state-owned Chinese company.
A report released by London payments consultant RBR indicated that UnionPay accounted for a whopping 37% of the USD$21.6tn global payments sector.
It success thus far has been almost entirely dependent upon, as well as confined to, the Chinese market.
The Financial Times reports that UnionPay hopes to change its domestic dependence, and expand into overseas markets to compete against established giants such as MasterCard and Visa.
UnionPay has already established a strong foothold in China’s South-east Asian neighbour of Myanmar, where its logo is emblazoned on local bank cards and it’s increasing viewed by domestic onsumers as being on equal terms with Visa.
Local banks in a number of other countries have also started to issue UnionPay cards to non-Chinese clients, including the Democratic Republic of Congo, Indonesia, Malaysia and Kazakhstan.
Neil Katkov, the Tokyo-based senior vice-president of finance consultant Celent, told FT is already disrupting the dominance of MasterCard and Visa, to become the first card that credit consumers in many emerging markets will encounter.
UnionPay’s expansion abroad is considered to be part of a government-backed initiative to raise influence and repute of China’s financial players.
The payments giant still has a long way to go, however, if it wants to vie against the incumbent giants of global payments sector.
While Visa current accounts for 50% of the global market, and MasterCard another 31%, UnionPay has only 0.5% share of the sector outside China.
UnionPay’s overseas expansion could also compromise its domestic position, given that PBOC has long blocked the entry of Visa and MasterCard into China, leading the World Trade Organisation to rule in 2012 that the country had discriminated against overseas payment companies.
Should UnionPay seek to expand further abroad, Chinese regulator will have to expand the access of its overseas rivals to the domestic market where it first rose to prominence.
