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Mastercard is reportedly resuming its push into China through a new joint venture (JV) with online clearing house NetsUnion Clearing Corp., commonly known as Wanglian, according to The Wall Street Journal, which cited a person familiar with the matter. After setting up the JV, in which Mastercard will hold a majority stake, the card giant will then refile its application with the People’s Bank of China (PBOC).
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Mastercard has been persistent in its pursuit of the Chinese payments market. This news follows a statement Mastercard issued last month, in which it reiterated its commitment to operate in China and confirmed that it’s in “active discussions to explore different solutions” and hopes to soon present another application for the bankcard clearing license.
The statement followed reports that the PBOC was delaying Mastercard’s and Visa’s applications to operate in China, which the central bank later denied. And earlier this year, anonymous sources claimed that the central bank had not yet acknowledged the card networks’ applications — which is typically the first step in its 90-day review process concluding in a decision.
China is expected to house the largest card market globally by 2020, representing a massive volume opportunity for new card entrants.
- Following Amex’s approach of forming a JV to enter China could streamline Mastercard’s efforts to enter the region. Amex formed a JV with Chinese fintech LianLian, called Express Technology Services Company, through which it will run its China operations. Amex’s approval from the central bank to operate in China last year suggested that the historically closed-off market was opening up for multinational players. However, it remains the only firm that’s been granted approval, lending truth to 2017 reports that foreign companies would need to form JVs in order to gain entry. Replicating Amex’s JV strategy, rather than trying to operate independently in China, could potentially enable Mastercard to see more success than its previous attempts to enter the Chinese payments market. And if Mastercard’s entry gets approved, it still has the potential to cement a leading position for itself among its US counterparts, particularly Visa, which still hasn’t received regulatory approval to operate.
- Gaining entry into China could substantially grow Mastercard’s global market share.There were 6.7 billion cards in circulation in China in 2016, and that figure is expected to hit 9 billion by 2020. Although major Chinese card network UnionPay holds more than 90% of the card network, Chinese consumers have around five cardson average per person; their propensity for having multiple cards could ultimately benefit Mastercard if it finally receives approval to operate in China. Further, consumers in China are particularly willing to embrace new payment methods. Entry into China can significantly expand Mastercard’s global market share and accelerate its worldwide gross dollar volume (GDV), which grew 14% in Q4 2018 to reach $1.55 trillion.
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