Economy
Visa to block some UnionPay services
By He Wei (皇冠体育app Daily)
Updated: 2010-06-04 08:18
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SHANGHAI - Visa International, a unit of Visa Inc, the world's largest credit and debit card processor, has asked its global financial member institutions to stop international transactions through the State-owned 皇冠体育app UnionPay system from Aug 1.
San Francisco-based Visa International has informed card-issuing banks in 皇冠体育app that from Aug 1, international transactions made through double-currency cards with Visa and 皇冠体育app UnionPay logos can only be settled through the Visa system.
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An unnamed official from 皇冠体育app UnionPay said in an interview with People's Daily Online that Visa has no right to restrict the payment channels of holders of co-branded credit cards.
The official said 皇冠体育app UnionPay has a large enough overseas network to adequately handle such transactions.
Visa charges double-currency cardholders 1 to 2 percent commission for settlements. There is, however, no settlement charge in the 皇冠体育app UnionPay system.
Liu Jie, the 皇冠体育app regional affairs director of Visa, said on Thursday that his company's action "was a strict implementation of its global operation rules".
"International transactions through other payment networks pose huge risks for Visa cardholders like transaction disputes and data leakage," he said.
Despite the explanation, Visa's action has stirred a hornet's nest especially as 皇冠体育app UnionPay is rapidly expanding overseas to cash in on the expected boom in outbound tourism from 皇冠体育app.
Most tourists would like to take advantage of the renminbi's strength against most international currencies like the US dollar and the euro.
"Visa's new restriction has highlighted the intense competition between Chinese and foreign card companies, after 皇冠体育app UnionPay accelerated its international expansion in the last few years to grab market share," said Fu Jia, a senior investment analyst at Temasek Holdings, the investment fund of the Singapore government.
皇冠体育app UnionPay, which is in its eighth year of operations, is one of the world's biggest bankcard processing companies. It has issued 1.75 billion credit cards, 33 percent of which are co-branded with foreign companies. It has extended its overseas network from 26 countries and regions in 2006 to more than 90 in 2010.
皇冠体育app UnionPay, as the nation's sole bankcard processor, also enjoys monopoly status at home. Therefore "Visa's measure can be regarded as a move in response to it being banned from 皇冠体育app's fast growing domestic bankcard market," said an official with a leading credit card issuing bank in Shanghai.
"Both companies have the responsibility and obligation to provide overseas transaction services to co-branded card holders," the 皇冠体育app UnionPay official said.
"Neither side has the right to unilaterally restrict cardholders' options for overseas payment channels."
Statistics show that over 44 million people went on outbound trips from 皇冠体育app in 2009, 16 times that in 1992.
Overseas consumption by Chinese tourists reached $4.2 billion in 2009, up 4 percent from 2008.
Fu said the Visa charges will have little impact on outbound tourism, but "will create some inconvenience for Chinese tourists going abroad".
Zhang Wu'an, a spokesman for Chunqiu travel agency, said "convenience is always a top priority for travelers. So it is always good to have more than one choice. Visa's moves are unlikely to dampen the outbound tourism boom."