Banks Positioning For China's Credit Card Boom
Competition in ChinaÆs banking card sector will take off this year, as greater use of credit and foreign exchange cards coincides with P2P banking and cross-border services, according to The Asian Banker. The opportunity is evident in that just three per cent of purchases in China are made with bankcards, versus 81 per cent in the US, and 64 per cent in Europe. In China, only one per cent of medium- to high-income residents has a credit card, versus 62 per cent and 74 per cent in Taiwan and Hong Kong, and credit cards are held by less than 10 per cent of residents in cities like Shanghai, Beijing and Guangzhou.Current card penetration rates run at 0.018 bankcards per person at their lowest, with the average person holding 0.7 cards. Mainland banks derive less than 0.1 per cent of their annual revenue from credit cards, while retail purchases with credit cards comprises just 0.05 per cent of all purchases. Banks are however ôkeen to encourage the use of credit cards as they profit from credit card operations through at least three channelsö, the Asian Banker reports. Analysts predict ChinaÆs bankcard market to grow by 75 to 100 per cent per year to end-2006, with over 50 per cent of residents in big cities, planning to apply for a credit card.
Since foreign financial institutions cannot issue credit cards at present, some of ChinaÆs local banks, such as China MerchantsÆ Bank, and Industrial and Commercial Bank of China (ICBC), will issue international banking cards within a year. Foreign banks like HSBC, Standard Chartered and Citibank, are forming strategic alliances with mainland lenders. HSBC is talking with China UnionPay, the national credit card settlement system that will link 70 per cent of bank cards issued this year, while Standard Chartered is to enter a JV with Bank of China, the largest card issuer, and Citibank is working with Shanghai Pudong Development Bank. Related Links:
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