American Express Co on Friday won approval to clear card payments in China, making it the first U.S. card network to gain direct access to what is set to be the biggest bank card market by 2020.
AmEx formed a joint venture with LianLian, a Chinese financial technology services firm, that will let charges on American Express-branded cards be cleared and settled in China, the New York-based company said Friday in a statement. A statement on the People’s Bank of China website posted the same day confirmed the news.
The approval shows progress in payment networks’ battle for access to mainland China, which were one point of contention raised in the Trump administration’s trade talks. The company will have to battle local rivals WeChat Pay and Alipay, which dominate the mobile-payment market in China. AmEx may have an opportunity to gain market share in the commercial and small-business segments, according to a note from Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods Inc.
The approval is a “significant step toward opening up China’s bank card market to foreign investors”, the central bank said, adding that it would continue to ease in an orderly way market access for clearing and settlement institutions.
Up until now, foreign card companies have had to partner with China’s UnionPay, a state-controlled consortium that enjoyed a monopoly on all yuan payment cards issued and used in the country, for access to the country’s payments network.
Foreign card companies, especially behemoths like Visa and Mastercard, have been lobbying for more than a decade for direct access to China – where the number of cards in circulation is expected to rise to 9 billion by 2020 from 6 billion in 2016, according to research firm GlobalData Plc.
UnionPay counts Visa, Mastercard, and Apple Inc among its partners for payments-related services in China.