China's card base breaches 3 billion

Payment cards have doubled since 2007.

According to a new study by RBR, the number of payment cards in China reached three billion by the end of 2011, and has now doubled since 2007.

Cardholding has reached 2.7 per adult, which is relatively high by international standards, but the average masks wide variation across the country and the heavy bias towards debit cards. The majority of cards, merchants, EFTPOS terminals and payments are found in the developed eastern parts of the country.

There were only two payments made per card during 2011 however, well below the level seen in more developed countries, suggesting plenty of potential for further expansion in use of cards as a payment instrument.

Over 200 domestic and a handful of foreign bank card issuers are active in China. Almost all cards operate within the UnionPay card scheme, while a small proportion of these are dual-badged with another international scheme. Visa, MasterCard, American Express and JCB are all present in China, but are struggling, primarily due to national restrictions, to develop a major presence in the country.

Co-branded cards help banks to attract new custom. Debit cards continue to dominate; reasons for this include cultural preferences and the relatively low eligibility requirements in comparison to credit cards. It should be noted however that prepaid card issuing is restricted by anti-corruption regulations, and such products are therefore rare.

Credit card activity is growing, but the numbers are dwarfed by debit cards. Issuers are finding that relatively low customer and interchange fees (due to regulation), combined with low levels of borrowing and usage, mean that building a sizeable and profitable credit card business is not easy. Other countries with similar characteristics have often not seen their credit card sectors grow until foreign entrants come into the market.

Co-branded cards, where banks partner with another organisation, are very popular. There are 20 main types of co-branded card, of which shopping cards, cards for women and airline cards are the most common. Banks are actively promoting these products as part of their marketing strategies.

Competitive acquiring market boosts card acceptance. The total volume of payments with Chinese cards increased by over 250% between 2007 and 2011, and total expenditure grew by more than 400% over the period.

The acceptance infrastructure has finally started to catch up with the issued card base, and the number of EFTPOS terminals quadrupled between 2007 and 2011. The acquiring market is heavily skewed towards the Big Four banks, but their share of terminals is falling as the sector becomes increasingly competitive.

The ratio of 620 cards per EFTPOS terminal is less than half what it was in 2007, but remains far higher than the western European average of 85, indicating significant potential for further growth in the EFTPOS installed base.

To put the Chinese card market in a global context, it accounts for a third of the total worldwide card base and UnionPay is now the leading international scheme in terms of card numbers. The number of cards, and particularly transaction volumes, will continue to grow, making the Chinese card market increasingly difficult to ignore.