China approves MasterCard for domestic payments processing

Card giant Mastercard finally received the green light from China’s authorities, allowing it to start domestic payment processing in the country. As a result, the US firm is now allowed to issue yuan-denominated bank cards in China.

"#China has granted a bank card clearing license to MasterCard's joint venture…Following the approval 🇨🇳 has approved 2 overseas bank card clearing institutions—American Express & MasterCard—to enter the domestic market"https://t.co/kjHfKLBbxx

— China Beige Book (@ChinaBeigeBook) November 19, 2023

Mastercard receives a formal approval from Chinese regulators

Mastercard has been trying to gain access to the Chinese market for years, and while its efforts have finally proved successful, it was still a hard-fought battle. The country is known for being self-reliant, and so the entry of foreign card schemes into China’s multi-trillion dollar payments market did not come easily.

The country decided to ease restrictions on international companies back in 2015, allowing the firms to obtain licenses to operate locally by setting up units or through acquisitions of local firms. Of course, even then, gaining entry was a long and difficult process.

At the time, Mastercard made its move by forming a majority-owned joint venture called NUCC Information Technology, located in Beijing. The venture was formed in partnership with NetUnion Clearing Corporation (NUCC).

It wasn’t until February 2020 that China’s central bank, the People’s Bank of China (PBoC), finally approved the application from Mastercard NUCC, allowing it to start formal preparations to set up a local bankcard clearing institution. After that, the joint venture established certain standards, structures, rules, as well as infrastructure in line with the local regulations.

It also worked on obtaining the necessary certificates for a local switch business. Now, however, the venture received the formal approval on which it has been waiting for. Essentially, the PBoC and the National Administration of Financial Regulation allowed the joint venture to start domestic bankcard clearing activity.

A major step for everyone’s benefit

Mastercard’s CEO, Michael Miebach, said that the company’s deeper participation in China’s market can finally start and that it will be beneficial not only for Mastercard but also for the country itself. That includes both its businesses and its consumers.

Of course, Mastercard will also benefit from boosting its corporate mission, which is to connect and power an inclusive digital economy for everyone’s benefit. The company wants to bring new possibilities for everyone, and gaining this approval is a major step in the right direction.

With China being an almost entirely cashless society these days, Mastercard will see major competition. Right now, Alipay and WeChat Pay are the dominant platforms that hold around 91% of the market share. Even so, China’s state media presented the move as the country’s effort to open up its economy, so while it represents a major milestone for Mastercard, it also represents a big change for China, as well.