The Credit Card Market in China: Opportunities for Foreign Firms
The credit card market in China has been growing at double-digit rates since the early 1990s and has boomed since 2003. China became the world’s second largest credit card market (after the U.S.) in 2012 in terms of number of cards issued and transaction volume, and is expected to become the world's largest credit card market by the year 2020.
Being highly policy-driven, the Chinese credit card market is largely directed by political calculation, policy mission and administrative intervention. Even though economic and social factors play a vital role, government regulations and policies control or strongly influence the competitive landscape, the credit card ecosystem and the industry income structure. Foreign companies must recognize that government regulators are working on a course of regulation that is oriented toward supporting state-owned and domestic Chinese enterprises.
Even so, the Chinese credit card market will continue to be the most promising market worldwide due to the size of the national economy and population. And the relative slow-down of the Chinese economy will have a limited impact on the market given the huge scale of business opportunity and the tight control of credit risks by the central bank. Packaged Facts predicts that market growth in 2012 and 2013 will notch downward due to card migration and risk control concerns, but will pick up again from 2014 onward due to the growing customer base and developing mobile and internet payment business.
Differentiation of positioning based on brand image, promotional strategy and strategic vision is critical to success in this market. Big name foreign firms are attractive to middle- and upper-class Chinese customers, whom foreign companies can target through high-quality and exclusive services. In addition, younger adults are forming a new generation of consumers who are more technologically- and innovation-driven when it comes to choosing credit cards, such that the most technologically advanced companies will be best positioned to perform in this market.
At the same time, the payment processing market is going through a revolution in China with the introduction of third-party payments. New competitors are entering into the market and sharing profits from card payment companies and banks. Alliances and the competitive landscape have been transformed, and payment companies will need to reconsider their positioning and partnership strategy in this market.
Being highly policy-driven, the Chinese credit card market is largely directed by political calculation, policy mission and administrative intervention. Even though economic and social factors play a vital role, government regulations and policies control or strongly influence the competitive landscape, the credit card ecosystem and the industry income structure. Foreign companies must recognize that government regulators are working on a course of regulation that is oriented toward supporting state-owned and domestic Chinese enterprises.
Even so, the Chinese credit card market will continue to be the most promising market worldwide due to the size of the national economy and population. And the relative slow-down of the Chinese economy will have a limited impact on the market given the huge scale of business opportunity and the tight control of credit risks by the central bank. Packaged Facts predicts that market growth in 2012 and 2013 will notch downward due to card migration and risk control concerns, but will pick up again from 2014 onward due to the growing customer base and developing mobile and internet payment business.
Differentiation of positioning based on brand image, promotional strategy and strategic vision is critical to success in this market. Big name foreign firms are attractive to middle- and upper-class Chinese customers, whom foreign companies can target through high-quality and exclusive services. In addition, younger adults are forming a new generation of consumers who are more technologically- and innovation-driven when it comes to choosing credit cards, such that the most technologically advanced companies will be best positioned to perform in this market.
At the same time, the payment processing market is going through a revolution in China with the introduction of third-party payments. New competitors are entering into the market and sharing profits from card payment companies and banks. Alliances and the competitive landscape have been transformed, and payment companies will need to reconsider their positioning and partnership strategy in this market.
CHAPTER 1: EXECUTIVE SUMMARY
Emergence of Market
Table 1-1: Selected Credit Card Industry Statistics, 2011
Figure 1-1: Development Phase of Chinese Credit Card Market,2000-2011
Key Consumer Statistics
Figure 1-2: Consumer Survey: Which credit cards do you have currently?
Figure 1-3: Consumer Survey: Which one is your major credit card?
Banking Industry Overview
Figure 1-4: Market Share by Capital in Chinese Banking Industry,2003-2011
Foreign Banks in China
Top Chinese Players in Credit Card Market .
Figure 1-5: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011
Key Performance Indexes (KPIs) of Chinese Competitors
Table 1-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)
Income Structure of Chinese Bank Credit Card Businesses
Table 1-3: Credit Card Charges and Rewards in U.S. and China
Key Financial Data for China UnionPay
Foreign Bank Credit Card Business Models
Table 1-4: Foreign-Chinese Banks’ Credit Card Alliance List Foreign Card Payment Companies
Figure 1-6: Market Shares by Payment Company Brands, 2011
Table 1-5: Key Chinese Market Statistics for Foreign Credit Card Companies
In the Wake of Visa/CUP Dispute
Market Trends
Market Forecast
Figure 1-7: Chinese Credit Card Market Forecast, 2012-2016
Recommendations for Foreign Credit Card Issuers
Recommendation for Foreign Card Payment Companies
CHAPTER 2: MARKET OVERVIEW
Market Background
China Emerges as Second-Largest Credit Card Market
An Imbalanced Market
Figure 2-1: Household Consumption as % of GDP, 1980-2009
Table 2-1: Selected Credit Card Industry Statistics, 2011
China UnionPay and Its Competitors
Figure 2-2: Global Market Share by Transaction Volume of Credit Card Network, 2011
Figure 2-3: Global Market Share by Credit Cards in Circulation, 2011
Historical Development of Chinese Credit Card Market
Figure 2-4: China Demographic Map with a Comparable GDP
Figure 2-5: Development Phase of Chinese Credit Card Market,2000-2011
Development of China UnionPay
The State of the Market
Regulatory Environment: The Market Is Opening Up to Non-Banks
Preconditions for credit card business operation
Constraints on business processing outsourcing
Regulation of interest rates and lines of credit
Regulation of related markets
Policies on the way
Economic Growth and Urbanization Fuel Market
Infrastructure: Rapid Improvement in POS and ATM Penetration
Figure 2-6: Credit Card Infrastructures of U.S. and China, 2011
Industry Performance: Emphasis Shifts to Risk and Profit Management
Figure 2-7: Credit Card Income Structure of U.S. and China, 2011
Key Consumer Statistics
Figure 2-8: Consumer Survey: Which credit cards do you have currently?
Figure 2-9: Consumer Survey: Which one is your major credit card?
Cultural Factors: Wariness over Borrowing and Fees
CHAPTER 3: COMPETITOR LANDSCAPE
Banking Industry Overview
Figure 3-1: Market Share by Capital in Chinese Banking Industry,2003-2011
Figure 3-2: Top 15 Chinese Banks by Assets, 2011 ($M)
Figure 3-3: Net Income: Retail Banking Proportion of Top 15 Chinese Retail Banks, First Half 2012 ($M)
Foreign Banks in China
Table 3-1: Top Ten Foreign Banks in China by Assets, 2011
Chinese Bank Credit Card Business Models
Top Chinese Players in Credit Card Market
Figure 3-4: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011
Key Performance Indexes (KPIs) for Chinese Banks as Credit Card Players
Table 3-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)
Income Structure for Chinese Bank Credit Card Businesses
Table 3-3: Credit Card Charges and Rewards in U.S. and China
Key Financial Data for China UnionPay
Foreign Bank Credit Card Business Models
Table 3-4: Foreign-Chinese Banks’ Credit Card Alliance List
Foreign Card Payment Companies
Performance: MasterCard Is Catching Up with Visa in International Cards
Figure 3-5: Market Shares by Payment Company Brands, 2009
Figure 3-6: Market Shares by Payment Company Brands, 2011
Table 3-5: Key Chinese Market Statistics for Foreign Credit Card Companies
In the Wake of Visa/CUP Dispute
New Initiatives in Online and Mobile Payments
Profiles of Foreign Bank Credit Card Businesses
Citi Bank
Background of Citi China
Investment in China
Co-branded Credit Card with SPDB
Citi Credit Card
Strengths
Weaknesses
Opportunities
Threats
Bank of East China (BEA)
Background of BEA China
Alliance with Chinese Banks
BEA Credit Card Business
Strengths
Weaknesses
Opportunities
Threats
Hangseng and CIB
Background of Hangseng China
Background of China Industrial Bank
Cooperation Model in Credit Cards
Strengths
Weaknesses
Opportunities
Threats
HSBC and BOCOM
Background of HSBC China
Background of Bank of Communication
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
Deutsche Bank and Hua Xia Bank
Background of Deutsche China
Background of Hua Xia Bank
Cooperation Model in Credit Cards
Strengths
Weaknesses
Opportunities
Threats
Bank of America and China Construction Bank
Background of BofA China
Background of CCB
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
American Express and Industrial & Commercial Bank of China
Background of Amex China
Background of ICBC
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
Royal Bank of Scotland and Bank of China
Cooperation Model
Dissolution of the Alliance
CHAPTER 4: EMERGING MARKET DYNAMICS AND TRENDS
New Competitive Dynamics
Threats from New Entrants
Regulatory Environment: Foreign Invested Companies
Rarely Acquire a License
Vendor Activities: New Alliances Are Forming
Impact of New Entrants: Acquiring Bank Markets Are Getting Crowded
Impact of Migration to IC Cards: CUP Is Crowding Out Rivals
Regulatory Environment: Only CUP Has Mastered New ICStandard
Vendor Activities: CUP Promotes New Technology Enabled Cards Overseas
Impact on Market: Dual-currency Credit Cards Will Be Phased Out
Mobile Payments: Banks and Payment Companies Must Position Themselves Effectively in the New Ecosystem
Regulatory Environment: CUP Wins on the Standard Again
Vendor Activities—The Fight Over Mobile Payments
Impacts on Market—Jockeying for the Right Role in Mobile Payments
Credit Card Rates: Regulators Are Lowering Rates to Protect Consumers and Retailers
Regulatory Environment: Final Rate Decrease Plan Remains To Be Decided
Vendors Activities: Cash-out Rate Lowered by Some Major Banks
Impact on Market: Credit Card Profits Will Decrease by 15% to 25%
Market Trends
Market Forecast
Figure 4-1: Chinese Credit Card Market Forecast, 2012-2016
CHAPTER 5: RECOMMENDATIONS FOR FOREIGN FIRMS CREDIT CARD ISSUERS
Conclusions: This Is a Difficult but Worthwhile Market
Recommendations: Prepare for a Longer ROI Period and Differentiate Your Positioning
Card Payment Companies
Conclusions: A Major Breakthrough Seems Imminent
Recommendations: Be Patient and Prepare for Third-Party Payment Processor Licenses
Emergence of Market
Table 1-1: Selected Credit Card Industry Statistics, 2011
Figure 1-1: Development Phase of Chinese Credit Card Market,2000-2011
Key Consumer Statistics
Figure 1-2: Consumer Survey: Which credit cards do you have currently?
Figure 1-3: Consumer Survey: Which one is your major credit card?
Banking Industry Overview
Figure 1-4: Market Share by Capital in Chinese Banking Industry,2003-2011
Foreign Banks in China
Top Chinese Players in Credit Card Market .
Figure 1-5: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011
Key Performance Indexes (KPIs) of Chinese Competitors
Table 1-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)
Income Structure of Chinese Bank Credit Card Businesses
Table 1-3: Credit Card Charges and Rewards in U.S. and China
Key Financial Data for China UnionPay
Foreign Bank Credit Card Business Models
Table 1-4: Foreign-Chinese Banks’ Credit Card Alliance List Foreign Card Payment Companies
Figure 1-6: Market Shares by Payment Company Brands, 2011
Table 1-5: Key Chinese Market Statistics for Foreign Credit Card Companies
In the Wake of Visa/CUP Dispute
Market Trends
Market Forecast
Figure 1-7: Chinese Credit Card Market Forecast, 2012-2016
Recommendations for Foreign Credit Card Issuers
Recommendation for Foreign Card Payment Companies
CHAPTER 2: MARKET OVERVIEW
Market Background
China Emerges as Second-Largest Credit Card Market
An Imbalanced Market
Figure 2-1: Household Consumption as % of GDP, 1980-2009
Table 2-1: Selected Credit Card Industry Statistics, 2011
China UnionPay and Its Competitors
Figure 2-2: Global Market Share by Transaction Volume of Credit Card Network, 2011
Figure 2-3: Global Market Share by Credit Cards in Circulation, 2011
Historical Development of Chinese Credit Card Market
Figure 2-4: China Demographic Map with a Comparable GDP
Figure 2-5: Development Phase of Chinese Credit Card Market,2000-2011
Development of China UnionPay
The State of the Market
Regulatory Environment: The Market Is Opening Up to Non-Banks
Preconditions for credit card business operation
Constraints on business processing outsourcing
Regulation of interest rates and lines of credit
Regulation of related markets
Policies on the way
Economic Growth and Urbanization Fuel Market
Infrastructure: Rapid Improvement in POS and ATM Penetration
Figure 2-6: Credit Card Infrastructures of U.S. and China, 2011
Industry Performance: Emphasis Shifts to Risk and Profit Management
Figure 2-7: Credit Card Income Structure of U.S. and China, 2011
Key Consumer Statistics
Figure 2-8: Consumer Survey: Which credit cards do you have currently?
Figure 2-9: Consumer Survey: Which one is your major credit card?
Cultural Factors: Wariness over Borrowing and Fees
CHAPTER 3: COMPETITOR LANDSCAPE
Banking Industry Overview
Figure 3-1: Market Share by Capital in Chinese Banking Industry,2003-2011
Figure 3-2: Top 15 Chinese Banks by Assets, 2011 ($M)
Figure 3-3: Net Income: Retail Banking Proportion of Top 15 Chinese Retail Banks, First Half 2012 ($M)
Foreign Banks in China
Table 3-1: Top Ten Foreign Banks in China by Assets, 2011
Chinese Bank Credit Card Business Models
Top Chinese Players in Credit Card Market
Figure 3-4: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011
Key Performance Indexes (KPIs) for Chinese Banks as Credit Card Players
Table 3-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)
Income Structure for Chinese Bank Credit Card Businesses
Table 3-3: Credit Card Charges and Rewards in U.S. and China
Key Financial Data for China UnionPay
Foreign Bank Credit Card Business Models
Table 3-4: Foreign-Chinese Banks’ Credit Card Alliance List
Foreign Card Payment Companies
Performance: MasterCard Is Catching Up with Visa in International Cards
Figure 3-5: Market Shares by Payment Company Brands, 2009
Figure 3-6: Market Shares by Payment Company Brands, 2011
Table 3-5: Key Chinese Market Statistics for Foreign Credit Card Companies
In the Wake of Visa/CUP Dispute
New Initiatives in Online and Mobile Payments
Profiles of Foreign Bank Credit Card Businesses
Citi Bank
Background of Citi China
Investment in China
Co-branded Credit Card with SPDB
Citi Credit Card
Strengths
Weaknesses
Opportunities
Threats
Bank of East China (BEA)
Background of BEA China
Alliance with Chinese Banks
BEA Credit Card Business
Strengths
Weaknesses
Opportunities
Threats
Hangseng and CIB
Background of Hangseng China
Background of China Industrial Bank
Cooperation Model in Credit Cards
Strengths
Weaknesses
Opportunities
Threats
HSBC and BOCOM
Background of HSBC China
Background of Bank of Communication
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
Deutsche Bank and Hua Xia Bank
Background of Deutsche China
Background of Hua Xia Bank
Cooperation Model in Credit Cards
Strengths
Weaknesses
Opportunities
Threats
Bank of America and China Construction Bank
Background of BofA China
Background of CCB
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
American Express and Industrial & Commercial Bank of China
Background of Amex China
Background of ICBC
Cooperation Model
Strengths
Weaknesses
Opportunities
Threats
Royal Bank of Scotland and Bank of China
Cooperation Model
Dissolution of the Alliance
CHAPTER 4: EMERGING MARKET DYNAMICS AND TRENDS
New Competitive Dynamics
Threats from New Entrants
Regulatory Environment: Foreign Invested Companies
Rarely Acquire a License
Vendor Activities: New Alliances Are Forming
Impact of New Entrants: Acquiring Bank Markets Are Getting Crowded
Impact of Migration to IC Cards: CUP Is Crowding Out Rivals
Regulatory Environment: Only CUP Has Mastered New ICStandard
Vendor Activities: CUP Promotes New Technology Enabled Cards Overseas
Impact on Market: Dual-currency Credit Cards Will Be Phased Out
Mobile Payments: Banks and Payment Companies Must Position Themselves Effectively in the New Ecosystem
Regulatory Environment: CUP Wins on the Standard Again
Vendor Activities—The Fight Over Mobile Payments
Impacts on Market—Jockeying for the Right Role in Mobile Payments
Credit Card Rates: Regulators Are Lowering Rates to Protect Consumers and Retailers
Regulatory Environment: Final Rate Decrease Plan Remains To Be Decided
Vendors Activities: Cash-out Rate Lowered by Some Major Banks
Impact on Market: Credit Card Profits Will Decrease by 15% to 25%
Market Trends
Market Forecast
Figure 4-1: Chinese Credit Card Market Forecast, 2012-2016
CHAPTER 5: RECOMMENDATIONS FOR FOREIGN FIRMS CREDIT CARD ISSUERS
Conclusions: This Is a Difficult but Worthwhile Market
Recommendations: Prepare for a Longer ROI Period and Differentiate Your Positioning
Card Payment Companies
Conclusions: A Major Breakthrough Seems Imminent
Recommendations: Be Patient and Prepare for Third-Party Payment Processor Licenses
