Five foreign banks, (Citigroup, HSBC Corp., Standard Chartered Bank Ltd., Bank of East Asia Ltd. and Hang Seng Bank Ltd.), will become the first to be permitted to issue credit cards in China, assuming they pass the the country’s regulatory standards.
Overseas financial institutions are keen to participate in China’s credit card market. Previously they were able to issue credit cards (from 2004 onwards) but only through working with local partners.
No schedule is available for how long the five banks will have to wait to acquire the right to issue their own cards.
As recently as twenty years ago credit cards were virtually unknown in China, but in the wake of the country’s rapid economic expansion the desire for credit cards has swiftly grown.
Consulting firm McKinsey & Co. put the current number of cards in circulation at 40 million, up from just 3 million four years ago.
The Chinese market is being carefully opened up, alongside the government’s efforts to improve its state-owned banks.
It is unclear whether the cards will be dominated in yuan, which is desired by the banks. The Chinese limit transactions in the currency, and do not trade on international markets.
Should the Chinese commitments to removing obstacles to competition be carried through then revenues from card issuers could rise to US$5bn in just three years,a ccoridng to McKinsey & Co.