The collaboration with a Chinese entity began Wednesday, with processing of cards issued by banks in the country following years of preparations
Mastercard, the second-largest U.S. card network, received permission last November to sell domestic services in China as part of the joint venture. It received initial approval to begin preparing for those operations in 2020. U.S. companies seeking to offer such services must win approval from Chinese government authorities to offer bankcard clearing in the country.
Mastercard’s larger U.S. rival Visa has yet to land any such approvals to offer services in China, a burgeoning market with about 1.4 billion people. The country’s debit and credit market is valued at some $17 trillion annually, according to a November report from the financial firm Robert W. Baird.
The smaller U.S. competitor American Express also secured approval to operate in the country back in 2020.
U.S.-based card companies have been angling since at least 2017, with help from the U.S. government, to gain entry to the domestic market, in the hopes of attracting Chinese banks and consumers to their services. Having the wherewithal to sell services in the country can supplement and complement the U.S. card companies’ existing cross-border services flowing through China.
Still, U.S. card companies face significant domestic competition. They’re up against the dominant government-backed China UnionPay, which likely has an edge in attracting Chinese banks as card issuers.
Still, Miebach has noted in the past that Mastercard has been fostering bank relationships in China for years. “We have been very active in China on the cross-border side, and those are strong relationships with the same exact banks,” he said in February during an earnings call with analysts.
In March, Mastercard also said it will expand on an existing link with the Chinese company Alipay to let its one billion digital wallet users send money across borders to 180 markets.
Mastercard has also previously enabled internationally-issued Mastercard cards to link to Chinese digital wallets, giving travelers in the country access to widely-used QR codes for payments, the release said. In the past, it has also issued nearly 100 million cards to Chinese consumers who used them when traveling outside the country.
By Lynne Marek on May 10, 2024
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