Chinese Credit Card Usage

Chinese Credit Card Market Overview

The Chinese economy, the 6 th largest in the world, is undergoing massive transformation. The country has consistently posted impressive growth rates close to 8% for more than a decade, and is driving exponential growth in demand for credit cards, automobile loans, mortgages and other wealth management products.

The Chinese credit-card market holds vast potential, for both local and foreign financial institutions.

Current Market Conditions

· Latest official data from the People’s Bank of China showed as of June 2003, there were 91 card-issuing institutions on the mainland. Card circulation was estimated at more than 569 million (Source: The Standard, November 21, 2003).

· Only about one million Chinese citizens have credit cards, though 24 million more Chinese have debit cards that offer limited borrowing (Source: The Wall Street Journal Europe, December 4, 2003)

· With more than 45,000 banks, the credit card market in China is complex and highly fragmented, with little inter-regional connectivity and disparate standards. As yet, no national standards exist for magnetic stripes, account numbering or point-of-sale (POS) terminals.

· Cash is still the predominant form of payment. Spending on plastic accounts for approximately 3% of consumer spending in China, in comparison to more than a quarter in Hong Kong. Though recent years have seen a rapid increase in the presence of plastic, these cards tend to be used primarily for ATM cash withdrawals.

· Of the estimated 20 million merchants in China, only approximately 414,000 accept cards, and of these, just 150,000 accept foreign-issued cards (Source: Cards International, March 2003)

Poised for Growth

· Many analysts predict credit card usage to grow 75-100% per annum for the next 2-3 years.

· The foreign currency credit-card market is poised for spectacular growth in coming years, especially in view of robust consumer spending, impending competition from international banks, and increases in foreign trade and travel.

· Major cities already are showing signs of an appetite for credit cards, and the urban acceptance and penetration rates of credit cards in the mainland are likely to grow comparably to Taiwan and Hong Kong.

· As the infrastructure of the credit card market is developed and merchant coverage improves, consumers will become increasingly familiar with the ease and convenience of spending on plastic.

· Much of the impetus for increased investment in the banking system comes from the impending market entry by foreign players, which has been facilitated through China’s recent accession to the WTO.

· The government has set up a nationwide clearing system known as China Union Pay, which is co-owned by all of the major card issuers. China Union Pay aims to link up all payment card systems in China’s fragmented banking industry and bring a much greater degree of consistency to the market. China Union Pay is also seeking to create a single acceptance and settlement platform for all credit and debit cards in China.

http://home3.americanexpress.com/cor.../cc_market.pdf

Now this is actually quite interesting when you think about it for several reasons..

1) Instantly is dispels a lot of the myths surrounding the usage of credit cards in China. In fact, many adult webmasters are STILL under the impression that China doesnt use credit cards at all :eek:

2) Potentially, once the Chinese credit card marketing has been nationalized this is going to present us with a much more potent billing method than just utilizing dialers on our Chinese traffic.

3) Affiliate programs have already started to look towards the markets in the Asia Pacific as additional streams of revenue and, many of these companies are not using dialers for their biling methods. In fact over the past 6 months i have been trying some affiliate paysites on Chinese traffic that have been localized and i have to admit, even though i know the traffic was potent, it was surprising at just how many sales can be gained from this traffic demographic to 'regular' paysites.

Anyway just figured i would post this as it certainly clears up a few myths and hopefully it will give you folks something to think about when it comes time for you to ask what you should do with your Chinese traffic ;)

Regards,

Lee