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American Express has received approval for card clearing services in China, making it the first foreign payment network to do so. This allows American Express to process local currency (RMB) transactions in the Chinese market. Approval was given to Express (Hangzhou) Technology Services Company Limited (“Express Company”), this is a joint venture between American Express & Lianlian DigiTech Co., Ltd (chinese fintech company). American Express expects to begin processing transactions sometime later this year.
China’s central bank has given the final nod to a network clearing license for an American Express (AXP.N) joint venture, allowing it to be the first foreign credit card company to launch onshore operations in China.
The approval comes against a backdrop of high Sino-U.S. tensions, with disagreements over trade and Beijing’s imposition of a national security law for Hong Kong.
The People’s Bank of China (PBOC) said in a statement Saturday that it had approved the license for Express (Hangzhou) Technology Services Co., a joint venture between American Express and LianLian DigiTech Co Ltd. It said the move reflected China’s continued opening up of its financial industry. It underscores China’s commitment to opening its US$45 trillion financial markets this year, in a bid to attract foreign capital and support growth.
The PBOC said in January that it had received American Express’s application to start operations in China.
In a statement, American Express said it expects to begin processing transactions later this year. “This approval represents an important step forward in our long-term growth strategy and is an historic moment, not only for American Express but for the continued growth and development of the payments industry in mainland China,” Stephen J. Squeri, chairman and chief executive officer of American Express, said.
AmEx will face large domestic competitors and a well-developed market for mobile payments. Mobile transactions topped 190 trillion yuan (US$27 trillion) in China in 2018, making it the world’s largest such market, according to iResearch. Ant Financial’s Alipay and Tencent Holdings’s WeChat Pay are the dominant firms.
China had 8.5 billion bank cards in circulation at the end of September, with over 90 per cent of them debit cards.
The approval is welcome news for New York-based AmEx. Spending on the firm’s cards in May was down in the mid-30 per cent from a year earlier, after a 45 per cent decline in March. The company set aside US$2.6 billion in provisions for losses in the first quarter, while its shares have fallen 18 per cent this year.
The PBOC has also approved an application by Mastercard’s (MA.N) China joint venture to conduct bank card clearing operations in the country, but the company has not yet received a network clearing license.
Card giant Visa (V.N) submitted its application in early 2018 and is still awaiting approval.
China is opening its local currency payments market to foreign companies after a decade of lobbying by foreign players seeking direct access to what is expected to soon become the world’s biggest bank card market.
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