The nation's latest move to further open up its financial services sector by allowing the first foreign card network to clear card payments in the country will promote sound development and healthy competition in its payments market, according to industry professionals and experts.
The People's Bank of China, the central bank, announced on Friday it had approved a joint venture of American Express Co in China regarding its application to commence operational preparations for a card clearing institution in the country, making the US-based multinational financial services corporation the first of its kind to gain direct access to the Chinese bank card payment market.
Express (Hangzhou) Technology Services Co, a joint venture formed by American Express and Chinese fintech company Zhejiang LianLian Technology Co, is required to complete operational preparations within a year and get the green light from the central bank before running the card clearing business, the PBOC said in a statement on its website.
"We are pleased to be the first foreign payment network allowed to build a network in the Chinese mainland," said Stephen J. Squeri, chairman and CEO of American Express.
Rivals of the network, such as Visa Inc and Mastercard Inc, acclaimed China's further opening of its payments market. Both have filed applications with the PBOC to participate in the Chinese market as a bank card clearing institution, and said they would keep working closely with the Chinese government as they proceed with the application process.
"We welcome the PBOC's action to continue liberalization of the financial services sector, including payments ... China is one of the world's fastest growing payments markets, and leading the way in mobile payments innovation. Our commitment to China is for the long term," Visa said.
Mastercard also expressed support for the latest step forward by the central bank.
"We are fully confident in the prospects of the China market ... We look forward to working with Chinese partners and using our convenient, safe and innovative global payments network to benefit consumers and companies, with the aim of building a better future for the Chinese payments industry," said Mastercard.
Allowing American Express to access the Chinese payments market is a major event in the process of the development of the market, which means that a second licensed card association, in addition to China UnionPay, will soon appear in terms of card payments clearing－one of the most crucial links of the financial market infrastructure, according to Yang Tao, director of the Research Center for Payments and Settlements of the Institute of Finance and Banking at the Chinese Academy of Social Sciences.
"It shows that China is steadily pushing ahead with financial internationalization and has entered into financial market infrastructure, a core level of the process. We can see that the country is not wavering in carrying out the strategy of the two-way opening up of its financial sector.
"The effort will help improve the competitiveness of the domestic bank card market, improve the efficiency of payment services, and benefit consumers by allowing them to enjoy more diversified services," said Yang.
It will also help promote the deepening of reform in the Chinese payments industrial chain by forming a new pattern for card associations, clearing institutions, financial institutions, and payments service companies to complement one another, he added.
"Domestic card network and clearing institutions will be further encouraged to directly face international competition, promote optimization of the payments industrial chain and the existing pattern of payments service platforms, play an active role in the global market, and contribute to the improvement of the global payments and clearing market by exporting their advanced experience and technology," he said.
Meanwhile, overseas card networks are likely to strengthen their advantage in cross-border payments service, focus on high-end clients, and highlight the improvement of user experience to satisfy the demands of clients amid renminbi internationalization, said experts familiar with the payments industry.