Magazine article American Banker

China Games Could Be Way in for Card Companies

Magazine article American Banker

China Games Could Be Way in for Card Companies

Article excerpt

As Chinese citizens partied in the streets this month to celebrate Beijing's selection as the host city for the 2008 Summer Olympics, credit card companies had their own reason to celebrate.

The world's most populous nation is also among the least saturated with credit cards, and the Olympics is a venue that card companies always try to exploit.

Two card companies, American Express Co. and Visa International, have a head start.

Amex has a long-standing relationship with the Chinese National Tourism Administration, to which it offers some promotional ads and marketing advice in exchange for the right to call itself the "Official Card of Tourism for China." And Visa, of course, is an Olympic sponsor.

The card companies themselves are not particularly eager to talk about China -- in part, it seems, because of its human rights record, and in part because there are still three sets of Olympic games to be played between now and then.

Nevertheless, some executives in the card business say the industry has high hopes for China, whose culture has just started to embrace the concepts of borrowing and credit. And whether or not U.S. issuers decide they want to court Chinese customers, the presence of the Olympic games will doubtlessly prompt more merchants to install card acceptance terminals.

James Shanahan, a card industry consultant who travels frequently to China for business, said he has found many places where he could not use a Visa, MasterCard, or American Express card. He called the 2008 Olympics an ideal opportunity to increase merchant coverage.

"Over there, no one knows" the western card brands, said Mr. Shanahan, managing partner with Business Dynamics Consulting, Newark, Del.

In China, the presence of a brand name on a card, or on a merchant's display, does not guarantee that a card will be accepted there, he said. "The Chinese don't know what (the brands) are there for."

The award of the Olympics to Beijing was controversial. In April the Chinese government detained the crew of a U.S. spy plane for 11 days after it collided with a Chinese fighter jet. And the country's ongoing persecution of the Falun Gong sect led the State Department this month to call on the Chinese to respect freedom of thought.

But Mr. Shanahan said bad feelings between the countries are not likely to overflow to promotional deals. "When you are in China, you see big western brand names all over the place. I don't think people look at companies' advertising and say to themselves 'Gee, they shouldn't be supporting this country.' "

Mainland China's 1.2 billion residents hold nearly 300 million payment cards, up sixfold from five years ago, according to research conducted by Mr. Shanahan's firm. However, only around 50,000 are traditional credit cards that can be used outside China. Those cards are held by Chinese residents who hold U.S. dollar banking accounts, probably in another country.

According Access Asia Ltd., a company that promotes ties between the United States and Asia, Chinese banks have issued more than 140 million cards since 1985, when the Bank of China issued the country's first debit card, the Great Wall Card.

According to the China News Services, Bank of China, which became a member of Visa in 1987, also became the first Chinese bank to introduce a true credit card, the Great Wall Consumer Credit Card, in 1999. Foreign banks had issued some credit cards before then.

The Access Asia report says that the percentage of retail purchases made in China with bank cards rose to nearly 10% last year. …

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