by Sarah Schmidt
March 1, 2016
This blog is based on the Packaged Facts report Commercial Payment Cards: U.S. and Global Market Trends, 9th Edition. Find out more by clicking here.
March 1 - Despite the recent slowdown in the Chinese economy and forecasts for tapering growth ahead, homegrown payment network China UnionPay (CUP) remains poised for robust growth both domestically and abroad. At a macro level, China’s two-speed economy emphasizes a shift away from investment and manufacturing and toward consumption and services, which should continue to boost payment card usage.
But CUP is also an increasing international player. Its presence is felt most strongly in markets close to home, such as Taiwan, Singapore, Korea and Hong Kong, where CUP has leveraged burgeoning cross-border travel trends and deepening economic ties to sign agreements with more and more financial institutions in those countries. But CUP is also gathering more steam in Japan and Australia, as well as the Asia Pacific region more broadly.
It has also aggressively forged partnerships with bank card issuers and processors across the globe, and buoyed by network reciprocity agreements, its cards are accepted at more than 37 million merchants, putting its brand acceptance on par with Visa and MasterCard.
Visa, MasterCard and American Express are already facing competition from CUP in the Asia Pacific region, which we expect to intensify over time. The wildcard concerns the degree foreign networks can make a dent in CUP’s home turf. While regulatory change now underway may promise an opening playing field, we do not envision the Chinese government providing a fully competitive format: it will continue to support the homegrown champion.
We expect China UnionPay to continue to increase global market share, thanks to continued home court advantage, a significant growth runway left in its home market, and continued movement overseas (weighted toward countries with outsized travel and economic ties but also growing into a truly global competitor).
On its home turf, the commercial card market remains significantly underdeveloped: while China’s use of cards is moving at light speed, it is also starting from near zero, and the more sophisticated multi-national commercial programs, especially B2B payables, offered in the U.S. remain only a glimmer in China’s eye. To move forward, it requires the expertise players such as MasterCard and Visa can bring to the table. In this regard, the Chinese market strongly benefits from their inclusion in the marketplace. The flipside is that China UnionPay will likely benefit, too, and could subsequently emerge as an even stronger global player.
-- David Morris
Provide the following details to subscribe.