US bank card firms apply to enter Chinese market in months

US-based payment card companies, including American

Express, MasterCard and Visa, are preparing to submit licence requests

to operate in China within months, according to a Reuters report.

When will US card companies enter Chinese market?

The

long wait for the US companies is unlikely to end soon. It may take two

years or more for the companies to clear all official scrutiny,

including from banking regulators, and for them to pass a security

review, as well as meeting other conditions, the sources said.

The

move comes against a backdrop of growing economic friction between

China and the United States, after the two countries failed on Wednesday

to agree on major new steps to reduce the US trade deficit with China.

US

payment network operators have been waiting for more than a decade to

get access to China. It is set to become the world's largest bank card

market by 2020, when the number of cards in circulation is forecast to

rise to nine billion from six billion in 2016, according to research

firm GlobalData Plc.

How open is China's bank card market?

China

first agreed in 2015 to open the card market to local and foreign

businesses, a move triggered by a 2012 World Trade Organization ruling.

However, foreign card companies have been unable to set up local

operations in the absence of a clear road-map from Chinese authorities.

In

May, Beijing and Washington agreed to a July 16 deadline for China to

issue "necessary guidelines" for the launch of local operations by US

payment network operators, leading to "full and prompt market access."

The

People's Bank of China (PBOC), the central bank, issued the guidelines

on June 30, according to three people familiar with the matter and a

copy of the document reviewed by Reuters.

Some

experts believes the expected entry of foreign card companies will

challenge the dominance of state-backed China UnionPay Co Ltd, which

currently is the sole operator in a yuan bank card payment network worth

more than eight trillion US dollars in China.

An American Express spokesman said the US company will

apply for a licence as soon as possible. "The PBOC's guidelines clearly

set forth the process ... and we're continuing to work with different

regulators as we move through this process," he said.

A

spokeswoman for Visa declined to comment, citing the quiet period ahead

of the announcement of the company's quarterly results. MasterCard did

not immediately respond to request for comment.

There has been no official information released by the PBOC yet.

Challenges in Chinese bank card market

Under

the conditions laid out by the central bank, all payment companies

would have to set up technology and data infrastructure and a back-up

data system within China.

This is a concern for the foreign payment network operators, according to industry insiders familiar with the situation.

UnionPay

has alsobeen expanding its operations overseas and has a presence in

over 160 countries, including the United States, while the likes of

MasterCard and Visa have been waiting to offer yuan-denominated cards

for years.

UnionPay's share of the global credit card

market rose to 25 percent in 2015 from 13 percent in 2010, drawing

level with MasterCard but lagging Visa's more than one-third market

share, according to Euromonitor International.

The

plans by the major global card companies to enter China also come at a

time when Chinese consumers are increasingly turning to mobile and

online payments and money transfers, using services such as Tencent

Holdings' WeChat Pay and Alibaba Group Holding's affiliate Alipay.