The Decade’s 12 Greatest Developments in Payments: #9 Shanghai Surprise

China emerged in the last decade as a major force in payments. Coinciding with the enormous growth of the economy, China has rapidly increased the acceptance of cards by merchants and the use of cards to pay by consumers. Chinese banks have expanded their issuance of debit cards and have moved aggressively into credit cards. In 2008, there were 16.7 billion card transactions that resulted in a total spend on cards in China of 127.16 trillion RMB ($18.75 trillion). More than a million merchants accepted cards that year.

Although there are limits on the ability of foreign networks to operate in China many major players have entered China through alliances with domestic financial institutions. TSYS, one of the pioneers, for example, formed a processor joint venture with China Union Pay in 2005 while American Express teamed with Chinese ICBC to issue cards the year before. Things have opened up for foreign players—last year Citi got approval to issue debit cards in China on its own.

At the turn of the century China wasn’t really on anyone’s map when it came to payment cards. Few merchants outside of the main tourist areas accepted any kind of cards. Each bank issued its own cards and signed up merchants. That resulted in merchants that took cards having multiple card terminals for accepting the many cards. Card payments were almost entirely debit. There were no domestic credit cards.

Nine years later China is not only a giant in cards but a growing one. The Chinese government helped spark the growth by creating Shanghai-based China Union Pay and requiring banks to belong to this card network. CUP has worked at standardizing merchant acceptance and driving card growth in China through itself and its many joint ventures such as the one it recently formed with mobile operator China Unicom.

China Union Pay has become a world acceptance mark over the last decade. CUP bugged cards are accepted in almost 70 countries around the world. It is likely to become a world force in cards. It is likely to become an increasing force in payments worldwide in the next decade.

Much about Chinese rapid development is breathtaking. But the fact that in a decade the country has achieved such rapid growth of the card business and expanded globally is remarkable. As always China has both opened up a vast new market and unleashed new competitors onto the global scene. That makes it my 9th greatest development in the last decade.

Previous Great Developments in Payments During the Last Decade:


#10 Collateral Damage from the Financial Crisis – Consolidation and Regulation

#11 How the World War on Interchange Fees Transformed the Card Industry

#12 American Express Goes Global

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