Credit-Card Deal Boosts China's Efforts Toward A National System

A co-branding agreement between American Express and Industrial and Commercial Bank of China is designed to help the nation's efforts to build a national credit-card system.
In a boost toward building a national credit-card system in China, Industrial and Commercial Bank of China and American Express Co. this week disclosed a co-branding agreement under which the bank will issue its own cards bearing the American Express logo. ICBC, the largest card issuer in China with 80 million cards in circulation, will begin issuing Peony cards bearing the AmEx logo later this year; it has similar agreements with MasterCard and Visa. Peony is the name ICBC uses for its own credit card, which it launched in 1989.

The American Express-branded Peony cards will be accepted by ICBC's network of merchants, some of which already accept traditional American Express cards, as well as by merchants around the world who accept American Express cards. American Express will advise ICBC on marketing and risk-management issues, a spokesman says.

In contrast to the global systems run by established card brands MasterCard, American Express, and Visa, the credit-card system in China is highly fragmented, with more than 90 mainland banks each operating its own card network. Although some 570 million cards have been issued in China, the lack of uniformity on technical standards such as magnetic stripes, account numbering, and retail terminals has limited their use mainly to withdrawing cash from ATMs; only 3% of consumer spending in China is done via credit card, compared with more than 25% in Hong Kong.

In January, ICBC launched a co-branded Peony card bearing the China UnionPay logo; the cards are accepted by merchants in both mainland China and Hong Kong. China UnionPay is a private company dedicated to linking all banks and payments systems in China's major cities by next year.

Both ICBC and China UnionPay have standardized on the ICE card terminals from Hypercom Corp. and have rolled thousands of them out to merchants across the nation. Hypercom also has created and installed customized networks for the Taiwan Lottery and Fubon Bank, one of Asia's largest financial institutions.