CHINA has announced it will open up its market for clearing domestic bank card transactions, a move that should allow foreign players such as Visa Inc. and MasterCard Inc. direct access to a market valued at US$6.84 trillion last year.

    Foreign firms will be able to set up their own clearing companies in China and apply to the central bank for licenses for bank card clearing businesses starting from June 1, the State Council said in a statement on its website yesterday.

    The measure is set to end the near monopoly held by China UnionPay Co. Ltd., the country’s domestic champion, and allow Visa and MasterCard, the world’s two largest credit and debit card suppliers, to challenge the State behemoth in the bank card payment market.

    China’s central bank said that bank card consumer transactions, for both credit and debt, amounted last year to 42.38 trillion yuan (US$6.84 trillion), representing growth of 33 percent from a year earlier.

    The move is also set to resolve a longstanding trade dispute between the Chinese Government and its U.S. counterpart. In 2012, the World Trade Organization ruled that China’s policies regarding electronic payment providers discriminated against foreign card companies.

    “Opening up the market for bank card clearing will help improve the country’s card-clearing services through market competition,” said the People’s Bank of China in an online statement yesterday.

    “(The State Council announcement) fully represents the principles of opening up the Chinese financial system and achieving a fair and competitive market environment,” the central bank said.

    The Chinese Government in October indicated that it would free up its credit card market to foreign players.

    A China UnionPay spokesman said the company “supports and will firmly execute” the government’s decision and will compete equally with its global peers in the market.

    A senior credit card executive said he welcomed the “positive development,” but said further details and clarification are needed from China’s central bank and banking regulator.

    “End to end we could be in the market within 12 months,” he said.

    Currently, Visa and Mastercard piggyback their services on China UnionPay’s network when accepting yuan payments and are required to pay network access fees.

    Foreign players who provide only bank card clearing services in foreign currencies for cross-boarder trade are not required to set up a bank card clearing operation inside China in principle, the statement said.

    The announcement also said foreign investors that want to acquire bank card clearing institutions will be required to go through necessary security checks.

    The central bank and banking regulator, China Banking Regulatory Commission, will issue detailed rules for implementation.(SD-Agencies)