Visa (V.NYSE) has informed banks that they must stop using China’s state-backed UnionPay system to process international payments for co-branded Visa/UnionPay credit cards, the Financial Times reported. If the banks do not comply, Visa will begin charging penalty fees as of August 1 this year. Beijing has effectively locked Visa, Mastercard (MA.NYSE) and American Express (AXP.NYSE) out of China’s growing payment processing market, where UnionPay enjoys a monopoly. At the same time, UnionPay has been expanding overseas. UnionPay charges lower and fewer fees and offers cardholders superior exchange rates on selected currencies than Visa and its international peers. US trade officials and business leaders have said China’s protection of the UnionPay monopoly violates its WTO commitment to open the payment processing market to foreign competitors by 2006. UnionPay, which is owned by 80 state-owned banks, can be used in more than 90 countries. China issued around 50 million credit cards in 2008 and McKinsey & Company predicts that there will be 300 million cards in China by 2013.
Categories