Payment sector ready for full opening-up

Move means fewer monopolies, reduction in risk

China will identify, classify and remove restrictions on foreign investment in terms of market access and shareholding in the payments sector, a central bank official told a meeting in Beijing on Thursday.

In the payment service market, China's payment products are evolving and leading in the world in some areas, Fan Yifei, deputy governor of the People's Bank of China (PBOC), said at the 6th China Payment and Clearing Forum 2017.

Fan said the key point was work on the Belt and Road initiative, attaching the same importance to bringing foreign entities into the domestic market as to Chinese financial institutions going global.

China's financial opening-up still has huge potential, experts said. With further opening-up in the payment sector, there will be more competition among domestic companies, and monopolies will be broken. This will reduce financial risks and introduce new impetus.

As of the end of 2016, China's five major banks' international settlement business reached $12.37 trillion. UnionPay cards have expanded to 160 countries and regions, becoming one of the main brands in global payments, Fan said.

Compared with China's opening-up in such financial services as banking, securities and insurance, foreign investors' access to the domestic payment market is at an early stage, experts said.

For example, China's non-banking payment sector has long been closed to foreign investors, and only Chinese companies with payment licenses are allowed to operate in such segments, Dong Zheng, editor-in-chief of credit card information portal 51credit.com, told the Global Times on Thursday.

That's why some foreign non-banking payment institutions that have expanded globally have yet to set up a subsidiary in China, he added.

"Those banks that have already gone global need to provide more services besides settlements, for instance loans, investment products, funds and insurances. Banks can look into full services after setting up overseas branches," Jin Baisong, an independent economist, told the Global Times on Thursday.

Experts pointed out that in terms of opening-up, a comprehensive plan needs to be developed.

A coordinated plan will help different financial institutions make use of their competitive advantages and unleash their development potential, Jin noted. A mature credit rating system is needed to serve as a scorecard for companies in the real economy.

"Based on companies' business credit, we will gain better visibility into risks. China can also establish its own international rating agencies," Jin remarked.

To better hedge risks, lenders should share information.

"Once loan and credit information is shared among loan organizations... Risk control will be more effective," Jin said.

Dong Ximiao, a research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, predicted that the opening-up of the payment market will start with freeing up bankcard clearing services to foreign players.

"Foreign players such as Visa and MasterCard have applied for licenses for bankcard clearing business and the central bank is now reviewing those applications," he told the Global Times on Thursday.

Dong noted that the foreign rivals' participation in the domestic payment market will challenge the longstanding dominance of domestic companies such as China Unionpay in the bankcard clearing sector and Alipay and WeChat Pay, which collectively represent more than 90 percent of the non-bank payment market.

"The opening-up of China's bankcards clearing market, which allows the entrance of foreign institutions, is not only meaningful for MasterCard, but also for all Chinese consumers," a spokesperson from US-based payment MasterCard told the Global Times on Thursday. MasterCard will work with financial institutions and the government to expand its service in China, he added.

"The likely benefits of opening-up outweigh the negative effects of greater competition on local institutions," Dong Zheng said, adding that domestic companies are in a better position to withstand competition compared with a decade ago.

The introduction of experienced foreign players can transform the situation, spurring domestic companies to learn, innovate and upgrade to cement their positions, while also moving close to international practices, according to Dong Ximiao.