China allowed Visa to prepare for entry into the domestic card payments market
The People's Bank of China has allowed the American payment company Visa to begin preparations to establish its own clearing organization in the country. This opens the way for the company to service domestic payments in yuan—a segment it has not had full access to for years.
Visa announced the decision of the Chinese regulator in its official press release on October 13.
Visa Information Technology (Beijing), a China-registered subsidiary of the American payment corporation, received the approval. It will be able to begin official preparations to establish an organization that will process and clear domestic card transactions.
Visa called this decision an important milestone in its multi-year efforts to enter the Chinese domestic payments market.
Visa has one year to prepare
According to the People's Bank of China, the company must complete preparations for operating in the domestic market within one year.
After that, Visa will be able to apply for a final license. The application will be reviewed by the People's Bank of China and the National Financial Regulatory Administration.
Only after approval of this application will the company have the right to fully clear domestic card payments in yuan.
Thus, the decision of October 13 does not yet mean that Visa will begin operating as a domestic payment network in China. The timing of the actual launch depends on completing preparations and obtaining final regulatory approval.
Visa CEO Ryan McInerney noted that the company has been working in the Chinese payment market for more than 40 years and expects to expand its presence after meeting all regulatory requirements.
How the new approval differs from Visa's current operations in China
Visa is already present in China, but its activities are primarily related to international payments. In particular, Visa cards are used for cross-border transactions by Chinese consumers and payments by foreign clients.
At the same time, the company has not been able to independently clear ordinary domestic card payments in yuan.
After obtaining a full license, Visa will be able to work with Chinese banks to issue cards of its own payment system for use within the country. The company will also be able to process payments between Chinese buyers and sellers through its own infrastructure.
This will significantly expand Visa's potential market, as it involves not only international travel or purchases abroad, but also everyday payments by Chinese consumers.
Visa enters the market after Mastercard and American Express
Two other major American payment companies have previously received approval for domestic card activities in China.
American Express obtained the relevant license in 2020 through a joint venture with a Chinese partner. Mastercard went through a similar procedure in 2023 and subsequently began operations through a local joint venture.
Visa, unlike these competitors, plans to operate through its own foreign-owned company.
Despite the gradual opening of China's financial sector, competition in the local payment market remains high.
In the card payment segment, the leading positions are held by China's UnionPay, while a significant share of everyday payments is made through digital services Alipay and WeChat Pay.
Therefore, even after obtaining a license, Visa will have to compete not only with other international card systems, but also with mobile payment platforms widespread in China.
Decision made amid US-China trade negotiations
The opening of the Chinese payment market to Visa takes place against the backdrop of negotiations between Washington and Beijing on trade and economic relations.
As the Financial Times notes, American financial companies have for years sought broader access to the Chinese market. Visa has been trying to gain the ability to conduct domestic card operations at least since 2015.
For a long time, one of the main barriers remained the system of regulatory approvals, which limited competition of international payment networks with local operators.
In Visa's statement, McInerney separately noted the role of the leadership of the United States and China in developing constructive relations between the two largest economies in the world.
For the American corporation, the new approval creates an opportunity to generate an additional source of revenue in one of the largest payment markets in the world. However, the actual financial effect will depend on the timing of licensing, cooperation with Chinese banks, and the company's ability to attract users.
Sources: Visa, Xinhua citing the People's Bank of China, Financial Times