China

American Express wins Chinese Bank Card Clearing Licence

American Express (AmEx) has reportedly received approval to begin operations for bank card clearing services in China, making it the first foreign payments network approved to process local currency transactions in the country.

According to an article by Bloomberg, covered by the South China Morning Post, AmEx’s China joint venture, Express (Hangzhou) Technology Services has been granted a network clearing license by the People’s Bank of China.

On the back of being granted the license, AmEx’s JV, which gained initial approval in 2018, will need to begin clearing operations within the space of six months.

The approval marks the continuation of China’s commitment to opening up its financial markets in 2020, which reportedly boast a value of USD45 trillion, with the aim of attracting foreign capital, and to foster growth.

The JV will reportedly create a clearing network which will process both online and offline payment transactions, and will be cooperating with onshore mobile wallet services providers, according to an AmEx statement.

Stephen Squeri, CEO, AmEx, said: “This approval represents an important step forward in our long-term growth strategy.”

The domestic clearing services industry is already strong, according to the article, with many onshore competitors boasting well-developed offerings, and with a strong mobile payments market. In 2018, mobile transactions in China reportedly exceeded USD27 trillion, with Alipay and WeChat the biggest players in the market.

AmEx was apparently heavily hit by the Covid-19 pandemic, reporting a 45% decline in card spending in March 2020, resulting in a mid-30% fall in AmEx card spending in May 2020, when compared to 2019 figures.

In February 2020, AmEx rival MasterCard reportedly received initial approval from the People’s Bank of China to establish a Chinese clearing business. The opening of the market to US card companies comes as part and parcel of the US trade deal signed in early 2020, and as such the monopoly enjoyed by local firms is gradually being challenged.

The opening of the Chinese market to card companies signals the beginning of the country’s plans to allow other foreign entities to offer services, including insurance, asset management and investment banking.