China’s central bank approves Mastercard joint venture for clearing business

Approval comes three weeks after China and the US sign phase one trade deal, but three decades after Mastercard established a presence in China

US bank card firms face an uphill battle in China, given dominance of UnionPay and Chinese consumers preference for mobile phone payment apps

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Mastercard will face tough competition from the likes of China’s UnionPay. Photo: Handout

Published: 10:04pm, 11 Feb 2020Updated: 3:54pm, 13 Feb 2020

China’s central bank on Tuesday said it had approved an application from Mastercard's joint venture to establish a bank card clearing business in China, a major step in the US company’s decades-long march to enter the yuan payment and clearing market.

The American firm’s joint venture, which was established in March 2019 with the central bank affiliated Netsunion Clearing Corporation, will start preparing a new institution to begin bankcard clearing services , the People’s Bank of China (PBOC) said in a statement.

Netsunion was established in 2017 and all third-party payment services involving bank accounts must go through its platforms, cutting direct clearing between banks and service providers such as Alipay and Wechat Pay, and giving Beijing access to data on all mobile transactions.

Mastercard said in a statement that the company will “be able to apply to the People’s Bank of China for formal approval to begin domestic bank card clearing activity” within a year.

The approval by China was granted three weeks after Beijing and Washington signed their phase one trade deal, in which China promised it would further open its domestic financial market to firms from the United States.

The central bank said in a statement that the approval reflects China’s commitment of “opening up the financial sector”, but it did not mention the partial trade deal.