The payment card network China UnionPay Ltd. has struck an acceptance agreement with U.S. Bankcard Services Inc., an independent sales organization based in California.
Hang Jia, China UnionPay's chief representative for the Americas, said the agreement was the fifth such acceptance deal in the United States. The other merchant acquiring partners are in New York and Dallas.
Started in 2002, the Shanghai company operates China's only national electronic payments network and card brand. China UnionPay has said this year that one of its goals is to expand into other countries.
Of the 2.07 billion China UnionPay cards issued to date in China, 91% are debit cards and the rest are credit cards.
U.S. Bankcard Services, based in City of Industry, said the agreement, announced July 5, will help merchants accept payments from the growing number of Chinese consumers visiting the United States.
Chinese travelers want to use their China UnionPay credit and debit cards, but for different purposes, Jia said. They use credit cards for hotel, air and car rental services, but they prefer to use debit cards for regular expenses while traveling, and sometimes for luxury goods, he said.
China UnionPay credit lines are often low compared with cards issued by U.S. banks, Jia said. A $7,000 China UnionPay credit line is very large and not common, he said.
Jia expects to sign up more acquiring partners in the United States, but has encountered some obstacles. "We have merchants calling us wanting to know how to enable China UnionPay acceptance," but none want to switch to a new ISO, and many ISOs are reluctant to add China UnionPay acceptance, he said.
"Their ISO is not very positive about adding China UnionPay because they feel Visa and MasterCard acceptance are enough," Jia said. ISOs tend to act only when the merchant presents a clear business case to add UnionPay acceptance.
Nearly 2 million U.S. merchants accept China UnionPay debit cards now, but many do not realize it, Jia said. A 2005 deal between Discover Financial Services and China UnionPay enabled reciprocal acceptance on each network.
That means China UnionPay debit card transactions can travel on Discover's Pulse debit network, which is accepted at 1.7 million U.S. locations, and China UnionPay's credit transactions flow through the Discover network.
To help get past some of these obstacles, UnionPay will help cover some of the merchants' costs, such as paying for signage and education, Jia said. "We can share the cost."
Eighty Chinese banks issue China UnionPay cards. The brand is growing: in 2009 banks issued 1.3 billion cards, 42% more than in 2008, and spending rose 85%, to $891 million.
As China UnionPay makes a push into the United States, there is some friction between the top U.S. card brands, which have complained that they are encountering barriers as they try to expand into China.
In March, U.S. trade officials said they were considering filing a formal complaint against China with the World Trade Organization over rules that bar Visa Inc. and MasterCard Inc. from processing some transactions within China. In June, Visa told banks and merchants that they should use its network to handle transactions initiated outside China with cards cobranded with its logo and China UnionPay's.
