More Chinese to swipe credit cards in 2013

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By CCTV reporter Martina Fuchs

With consumer power and spending exploding, more and more credit cards are being swiped at ATMs and payment machines in the world’s second-biggest economy. The monopoly in China’s lucrative credit card industry has been broken last year, opening doors to global players. This is also changing the way people in the country process their payments, by using just their mobile phones for example.

In China’s booming retail industry, the credit card market presents one of the most enticing opportunities for foreign companies.

At global credit and debit card network MasterCard, the trend is evident: While cash spending is decreasing, plastic spending is on the rise.

Hai Ling, President Greater China of Mastercard Worldwide, said, "That is partly driven by trends such as the emergence of e-commerce. You cannot stick cash into a computer. So plastic payment, electronic payment become really, really important. Drivers also include China’s economic growth, the government is extremely committed to the growth of China, so the emergence of the middle class, urbanization, I think all of this bodes very well for the electronic payment business."

But it has been a long way coming. China’s UnionPay is one of the largest payment processing companies in the world and accounts for some 30 percent of credit cards issued globally.

Although foreign credit card issuers have been allowed to operate in the country, they had to use the UnionPay network to conduct transactions in the past.

This changed last year, when the World Trade Organisation ruled that UnionPay was operating a monopoly.

China has started to open up the credit card business. This is kicking a door wide open to foreign credit card players such as MasterCard or Visa, which all have their own payment networks. Heated competition over the months and years ahead is guaranteed.

US banking giant Citigroup last year became the first global bank to get the go-ahead and issue its own credit cards to local consumers.

Kevin Wang, Associate Director of Nielsen China, said, "The quantity will keep increasing, we estimate that by the end of 2013, there will be 360 million credit cards in China. The pace of growth will slow down however. In 2013, we believe growth will range between 10 and 15 percent compared to last year."

The expansion of the market in China is however not equal, with a noticeable disparity between urban centres and rural areas. And there are even bigger hurdles in the way.

Hai Ling said, "The main challenge is really on the acceptance side. Today for example, if you go to buy things in a wholesale market, I don’t think plastic is accepted everywhere. So that is the main challenge to crack, and that is what is going to drive the electronic payments to the next level."

And the next level is this: the emergence of mobile payments. One day soon you will be able to pay on-the-go by simply touching your handset, or using just a dongle.