MasterCard Inc. has moved forward in its efforts to become a bigger player in Chinese payments industry under a new agreement with China UnionPay, the country's national bank card association.
The Purchase, N.Y. credit card network said Thursday that it recently signed a service agreement with China UnionPay that will allow MasterCard's Payment Gateway to process UnionPay card transactions made at e-commerce merchants outside mainland China.
MasterCard also said it and UnionPay signed an extension to a memorandum of understanding they announced in September to cooperate on developing services for online and other payment areas.
The goal of the memorandum is to build "a mutually beneficial relationship to explore future business development," MasterCard said in a press release, which gave no other details on what services the companies could work on.
U.S. payment companies are eager to do more business in China because of its growing card payments market. The number of bank cards in circulation in China jumped to 2.4 billion in 2010 from 475 million in 2002, according to a report released in May by Barclays Capital.
MasterCard's Payment Gateway service agreement and memorandum both pertain to "cross-border transactions" and not domestic transactions, which have been largely off-limits to U.S. companies because of China's strict rules surrounding involvement of foreign businesses in the payments industry.
For example, under current rules U.S. card networks must partner to provide co-branded cards with China UnionPay, which means Chinese banks can only issue cards carrying Visa's brand if the cards also carrying UnionPay's brand. Transactions made on those cards in China must be routed over UnionPay's network.
Under an agreement Visa has with China UnionPay, transactions made with the co-branded cards outside of China are to be routed over Visa, though UnionPay has opposed limiting the routing of international transactions to Visa.
The U.S. government has put pressure on China to lift restrictions, filing in September a World Trade Organization action against the Chinese government claiming it has given China UnionPay a monopoly over electronic payments services in the country. The WTO agreed in March to establish a panel to review the case.