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Chinese state-affiliated card network UnionPay is partnering with Italian acquirer Nexi to boost its acceptance network in Italy, according to PaymentsSource.
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The partnership will expand UnionPay acceptance among e-commerce merchants and Nexi will ensure UnionPay card acceptance among all merchants using its systems. The partnership is intended to increase UnionPay’s card acceptance level in Italy from its current 65% to 95% by March 2021.
Here’s what it means: This partnership continues UnionPay’s global ambitions to diversify its sources of volume outside of China, where most of its business is concentrated.
- UnionPay has been losing its spot as the largest card network in the world. In 2017, UnionPay held 33% of the global payment card market, making it the largest single network in the world. But that lead is down slightly from 2016, and UnionPay is now second to Visa by transactions, tied with Mastercard. About 99% of UnionPay’s business is concentrated in China, where customers have on average 4.5 cards per person.
- Mobile wallet popularity in China and foreign competition are eating into UnionPay’s business, making global expansion necessary for further growth. Chinese consumers have taken to mobile payments in droves, and that’s threatening UnionPay’s ability to generate meaningful volume and revenue growth. Major mobile wallets Alipay and WeChat Pay are ubiquitous in China, and because they circumvent card rails, they limit UnionPay’s ability to grow or generate valuable card fee revenue. And as China starts to open its doors to foreign card companies, it invites more competition that could threaten UnionPay, making it integral for the major card network to look overseas.
The bigger picture: Europe leaves a lot of room for growth for UnionPay — while cards are a top payment method in some European markets, adoption remains low in many others.
- The European market has been a pillar of UnionPay’s global expansion strategy.Earlier this year, UnionPay partnered with international payments provider Moorwand to launch the UPayCard, a multicurrency prepaid card for consumers and businesses in the UK, and last year it partnered with major Portuguese bank Millennium bcp to launch in Europe. Most recently, UnionPay announced a partnership with UK-based tech startup Tribe Payments to build out its credit and debit card offerings in the European market. UnionPay’s acceptance network in Europe is already high, with over 60% of merchants and ATMs accepting the network’s branded products across 40 European countries. That established network removes any hurdles to using UnionPay cards.
- Partnering with a local acquirer could be an effective way to achieve its goals in Italy.Nexi serves 890,000 merchants, which will give UnionPay a wide reach in a market that offers a strong growth opportunity: Cash usage in Italy is very high, with around 86% of transactions at the point-of-sale (POS) being made in cash. Expanding its merchant acceptance network in Italy now could allow UnionPay to cement its presence in the market ahead of noncash payment methods rising in popularity.
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See Also:
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- Uber is assembling a fintech team in New York City
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Source: Business Insider – feedback@businessinsider.com (Rachel Green)