The People's Bank of China, China's central bank, has accepted American Express' application to clear and settle domestic bank card transactions through a joint venture with Chinese mobile-payment provider LianLian. That was confirmed by Fritz Quinn, Amex VP of corporate affairs and communications for Japan, Asia/Pacific and Australia. If approved, Amex will be able to process transactions for local Chinese customers and for customers traveling to China.
"We're very much at the beginning," Quinn said. "There's a long way to go and we're going to keep moving ahead." The PBC has 90 days to approve or decline the application. If approved, Amex will have 12 months to build its network, including building issuing and acquiring agreements and establishing the payment rails and data centers. At the end of that period, Amex will have to apply for a business operations license indicating the card network is "ready to go," Quinn explained. LianLian has been one of Amex's third-party payment partners since 2012. Quinn said it's akin to Alipay and WeChat.
Penetrating the Chinese payments market is difficult, and many choose to partner with local companies. Through a partnership with China Merchants Bank in 2008, AirPlus International became the first card network to offer corporate cards to businesses operating in China. According to AirPlus International China's website, the network has more than 1,500 corporate customers in China, including European and American multinational corporations, large Chinese state-owned enterprises and large private Chinese multinational companies. In 2017, AirPlus International China's sales volume totaled 1 billion euros.
In 2007, Citibank went at it alone with its own platforms and systems and was one of the first international banks to incorporate locally. Still, it wasn't until 2012 that it gained a license to issue commercial cards. Citi issues cards locally through financial services company/card network UnionPay and internationally through MasterCard and Visa.
Amex has operated in China for several years through partnerships with local banks and UnionPay. Initially it issued dual-branded cards that would run on the UnionPay network in China and on the Amex network overseas. The dual-branded cards still exist, but in 2013, the companies began issuing two separate cards, one that works domestically in China and one that works outside China and on nondomestic websites.
In 2012, the World Trade Organization ruled against China's restrictive policies, forcing China to open its market to foreign companies. In 2015, China's State Council began allowing foreign companies to apply to set up bank-card clearing operations.
According to Quinn, Amex's approval to process domestic transactions would be significant for various reasons: China has the world's largest consumer credit market; Chinese nationals are traveling overseas in unprecedented numbers with growing middle and affluent classes; China's domestic payments market is growing rapidly, as is the economy; and more Western companies are looking to do business in China.
"We have [more than] 60 percent of the world's Fortune 500 companies that use our corporate products and are going to China and want to be able to use their cards. There is a lot of opportunity, but we're being realistic about it. … It's not something that's going to happen overnight, and we realize that," Quinn said. "The other benefit is what we can contribute to developing the [payments] market in China."