American Express received approval to start bank card clearing services in China, making it the first foreign payments network to be allowed to process local currency transactions in one of the world's largest markets.
The People's Bank of China granted a network clearing license to American Express's China joint venture, Express (Hangzhou) Technology Services, the central bank said in a statement on Saturday. The company, which won initial approval in 2018, is required to start the clearing service within six months, according to the statement.
The approval marks a win for the card giant amid rising political tension between the US and China sparked by the coronavirus outbreak and a crackdown on Hong Kong. It underscores China's commitment to opening its US$45 trillion financial markets this year, in a bid to attract foreign capital and support growth.
The bank card clearing network being built by the joint venture will process both online and offline payment transactions, and the company will cooperate with leading Chinese mobile wallet services providers, according to a statement from American Express.
"This approval represents an important step forward in our long-term growth strategy," Stephen Squeri, chief executive officer of AmEx, said in the statement.
AmEx will face large domestic competitors and a well-developed market for mobile payments. Mobile transactions topped 190 trillion yuan (US$27 trillion) in China in 2018, making it the world's largest such market, according to iResearch. Ant Financial's Alipay and Tencent Holdings's WeChat Pay are the dominant firms.
China had 8.5 billion bank cards in circulation at the end of September, with over 90 per cent of them debit cards.
The approval is welcome news for New York-based AmEx. Spending on the firm's cards in May was down in the mid-30 per cent from a year earlier, after a 45 per cent decline in March. The company set aside US$2.6 billion in provisions for losses in the first quarter, while its shares have fallen 18 per cent this year.
China committed to speeding up access to its market for card companies as part of the phase one US trade deal signed earlier this year. It's been a long process since the nation in June 2015 opened to licensing foreign firms to end a monopoly by state-run China UnionPay.
Mastercard in February won initial approval to set up its bank card clearing business in China, while progress has been slow for Visa Inc.
The opening to card companies is part of a broader plan by China to give access to its markets, which also includes insurance, asset management and investment banking. BlackRock and Goldman Sachs are among a bevy of firms that are preparing to pile in full-bore to capture profits from China's fast-growing wealth.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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