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Using its monopoly on interbank transactions in China as a base, bankcard networkChina UnionPay Co. Ltd. has been making progress in its goal of becoming an international brand, say some observers. In China, UnionPay has put its brand on nearly 1 billion bankcards, and its network handled the lion's share of payment-card transactions in China, supported by an estimated 1.2 million merchant outlets and 160,000 ATMs, as of the end of 2008. All told, the UnionPay network handled more than 5.7 billion point-of-sale, ATM and other transactions in 2008, up substantially from 2007, estimates Terry Xie, director of the international advisory service for United States-based Mercator Advisory Group Inc. State-controlled UnionPay remains China's only national bankcard network and association, with rights to all domestic card transactions except those from cards issued and acquired by the same bank. Since 2004, UnionPay has been mounting what some call an aggressive campaign to expand acceptance overseas, while holding competitors at bay at home. By the end of 2008, UnionPay cards were accepted at 600,000 ATMs in 50 countries and territories outside of mainland China, according to UnionPay figures. About 430,000 merchants in 30 countries and territories take the cards. A reciprocal agreement between UnionPay and U.S.-based Discover Financial Services will see UnionPay cards accepted widely at merchant locations and ATMs in the U.S. Discover gets access to UnionPay merchants. The Chinese card scheme has not offered similar deals to other international brands, believes Xie. "China UnionPay doesn't see Discover as a strong potential competitor in the local market," he tells CardLine Global sister publication Cards&Payments. Xie says UnionPay's dominant position in the Chinese processing and acquiring markets has helped it limit the number of merchants accepting Visa, MasterCard and American Express. Others say UnionPay cannot keep merchants from accepting the major international brands and foreign-issued cards. But a MasterCard executive tells Cards&Payments that UnionPay has tried to discourage its Chinese member banks from issuing dual-currency MasterCard or Visa credit cards. UnionPay did not respond to requests for an interview. Building up international acceptance is vital for UnionPay's future, says Dave Duncan, group executive for China and Southeast Asia for U.S.-based processor Total System Services Inc., or TSYS. Still, there is plenty of growth potential in China, he says. TSYS owns about 45% of CUP subsidiary UnionPay Merchant Services, an acquirer and third-party service provider. To some extent, UnionPay competes in the acquiring market with its own member banks, and there have been rumblings Chinese banks might start another card scheme. The central bank would have to approve an additional scheme or give international networks more access. TSYS' Duncan believes such change is likely. "The Chinese government is going to have to open up the market eventually."
