The credit card market in China has been growing at double-digit rates since the early 1990s and has boomed since 2003. China became the world’s second largest credit card market (after the U.S.) in 2012 in terms of number of cards issued and transaction volume, and is expected to become the world's largest credit card market by the year 2020.



Being highly policy-driven, the Chinese credit card market is largely directed by political calculation, policy mission and administrative intervention. Even though economic and social factors play a vital role, government regulations and policies control or strongly influence the competitive landscape, the credit card ecosystem and the industry income structure. Foreign companies must recognize that government regulators are working on a course of regulation that is oriented toward supporting state-owned and domestic Chinese enterprises.



Even so, the Chinese credit card market will continue to be the most promising market worldwide due to the size of the national economy and population. And the relative slow-down of the Chinese economy will have a limited impact on the market given the huge scale of business opportunity and the tight control of credit risks by the central bank. Packaged Facts predicts that market growth in 2012 and 2013 will notch downward due to card migration and risk control concerns, but will pick up again from 2014 onward due to the growing customer base and developing mobile and internet payment business.



Differentiation of positioning based on brand image, promotional strategy and strategic vision is critical to success in this market. Big name foreign firms are attractive to middle- and upper-class Chinese customers, whom foreign companies can target through high-quality and exclusive services. In addition, younger adults are forming a new generation of consumers who are more technologically- and innovation-driven when it comes to choosing credit cards, such that the most technologically advanced companies will be best positioned to perform in this market.



At the same time, the payment processing market is going through a revolution in China with the introduction of third-party payments. New competitors are entering into the market and sharing profits from card payment companies and banks. Alliances and the competitive landscape have been transformed, and payment companies will need to reconsider their positioning and partnership strategy in this market.

Table Of Contents

Chapter 1: Executive Summary

Emergence of Market

Table 1-1: Selected Credit Card Industry Statistics, 2011

Figure 1-1: Development Phase of Chinese Credit Card Market,2000-2011



Key Consumer Statistics

Figure 1-2: Consumer Survey: Which credit cards do you have currently?

Figure 1-3: Consumer Survey: Which one is your major credit card?



Banking Industry Overview

Figure 1-4: Market Share by Capital in Chinese Banking Industry,2003-2011



Foreign Banks in China

Top Chinese Players in Credit Card Market .

Figure 1-5: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011



Key Performance Indexes (KPIs) of Chinese Competitors

Table 1-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)



Income Structure of Chinese Bank Credit Card Businesses

Table 1-3: Credit Card Charges and Rewards in U.S. and China



Key Financial Data for China UnionPay

Foreign Bank Credit Card Business Models

Table 1-4: Foreign-Chinese Banks’ Credit Card Alliance List Foreign Card Payment Companies

Figure 1-6: Market Shares by Payment Company Brands, 2011

Table 1-5: Key Chinese Market Statistics for Foreign Credit Card Companies



In the Wake of Visa/CUP Dispute

Market Trends

Market Forecast

Figure 1-7: Chinese Credit Card Market Forecast, 2012-2016



Recommendations for Foreign Credit Card Issuers

Recommendation for Foreign Card Payment Companies

Chapter 2: Market Overview

Market Background

China Emerges as Second-Largest Credit Card Market

An Imbalanced Market

Figure 2-1: Household Consumption as % of GDP, 1980-2009

Table 2-1: Selected Credit Card Industry Statistics, 2011



China UnionPay and Its Competitors

Figure 2-2: Global Market Share by Transaction Volume of Credit Card Network, 2011

Figure 2-3: Global Market Share by Credit Cards in Circulation, 2011



Historical Development of Chinese Credit Card Market

Figure 2-4: China Demographic Map with a Comparable GDP

Figure 2-5: Development Phase of Chinese Credit Card Market,2000-2011



Development of China UnionPay



The State of the Market

Regulatory Environment: The Market Is Opening Up to Non-Banks

Preconditions for credit card business operation

Constraints on business processing outsourcing

Regulation of interest rates and lines of credit

Regulation of related markets

Policies on the way



Economic Growth and Urbanization Fuel Market

Infrastructure: Rapid Improvement in POS and ATM Penetration

Figure 2-6: Credit Card Infrastructures of U.S. and China, 2011



Industry Performance: Emphasis Shifts to Risk and Profit Management

Figure 2-7: Credit Card Income Structure of U.S. and China, 2011



Key Consumer Statistics

Figure 2-8: Consumer Survey: Which credit cards do you have currently?

Figure 2-9: Consumer Survey: Which one is your major credit card?



Cultural Factors: Wariness over Borrowing and Fees



Chapter 3: Competitor Landscape

Banking Industry Overview

Figure 3-1: Market Share by Capital in Chinese Banking Industry,2003-2011

Figure 3-2: Top 15 Chinese Banks by Assets, 2011 ($M)

Figure 3-3: Net Income: Retail Banking Proportion of Top 15 Chinese Retail Banks, First Half 2012 ($M)



Foreign Banks in China

Table 3-1: Top Ten Foreign Banks in China by Assets, 2011



Chinese Bank Credit Card Business Models

Top Chinese Players in Credit Card Market

Figure 3-4: Top 15 Banks in Chinese Credit Card Market by Transaction Volume (in billions) and Credit Cards in Circulation (in millions), 2011



Key Performance Indexes (KPIs) for Chinese Banks as Credit Card Players

Table 3-2: Key Performance Index of Top 15 Chinese Banks, 2011 (%)



Income Structure for Chinese Bank Credit Card Businesses

Table 3-3: Credit Card Charges and Rewards in U.S. and China



Key Financial Data for China UnionPay



Foreign Bank Credit Card Business Models

Table 3-4: Foreign-Chinese Banks’ Credit Card Alliance List



Foreign Card Payment Companies

Performance: MasterCard Is Catching Up with Visa in International Cards

Figure 3-5: Market Shares by Payment Company Brands, 2009

Figure 3-6: Market Shares by Payment Company Brands, 2011

Table 3-5: Key Chinese Market Statistics for Foreign Credit Card Companies

In the Wake of Visa/CUP Dispute

New Initiatives in Online and Mobile Payments





Profiles of Foreign Bank Credit Card Businesses

Citi Bank

Background of Citi China

Investment in China

Co-branded Credit Card with SPDB

Citi Credit Card

Strengths

Weaknesses

Opportunities

Threats



Bank of East China (BEA)

Background of BEA China

Alliance with Chinese Banks

BEA Credit Card Business

Strengths

Weaknesses

Opportunities

Threats



Hangseng and CIB

Background of Hangseng China

Background of China Industrial Bank

Cooperation Model in Credit Cards

Strengths

Weaknesses

Opportunities

Threats



HSBC and BOCOM

Background of HSBC China

Background of Bank of Communication

Cooperation Model

Strengths

Weaknesses

Opportunities

Threats



Deutsche Bank and Hua Xia Bank

Background of Deutsche China

Background of Hua Xia Bank

Cooperation Model in Credit Cards

Strengths

Weaknesses

Opportunities

Threats



Bank of America and China Construction Bank

Background of BofA China

Background of CCB

Cooperation Model

Strengths

Weaknesses

Opportunities

Threats



American Express and Industrial andamp; Commercial Bank of China

Background of Amex China

Background of ICBC

Cooperation Model

Strengths

Weaknesses

Opportunities

Threats



Royal Bank of Scotland and Bank of China

Cooperation Model

Dissolution of the Alliance



Chapter 4: Emerging Market Dynamics and Trends

New Competitive Dynamics

Threats from New Entrants

Regulatory Environment: Foreign Invested Companies

Rarely Acquire a License

Vendor Activities: New Alliances Are Forming

Impact of New Entrants: Acquiring Bank Markets Are Getting Crowded

Impact of Migration to IC Cards: CUP Is Crowding Out Rivals

Regulatory Environment: Only CUP Has Mastered New ICStandard

Vendor Activities: CUP Promotes New Technology Enabled Cards Overseas

Impact on Market: Dual-currency Credit Cards Will Be Phased Out

Mobile Payments: Banks and Payment Companies Must Position Themselves Effectively in the New Ecosystem

Regulatory Environment: CUP Wins on the Standard Again

Vendor Activities—The Fight Over Mobile Payments

Impacts on Market—Jockeying for the Right Role in Mobile Payments

Credit Card Rates: Regulators Are Lowering Rates to Protect Consumers and Retailers

Regulatory Environment: Final Rate Decrease Plan Remains To Be Decided

Vendors Activities: Cash-out Rate Lowered by Some Major Banks

Impact on Market: Credit Card Profits Will Decrease by 15% to 25%



Market Trends

Market Forecast

Figure 4-1: Chinese Credit Card Market Forecast, 2012-2016



Chapter 5: Recommendations for Foreign Firms Credit Card Issuers

Conclusions: This Is a Difficult but Worthwhile Market

Recommendations: Prepare for a Longer ROI Period and Differentiate Your Positioning



Card Payment Companies

Conclusions: A Major Breakthrough Seems Imminent

Recommendations: Be Patient and Prepare for Third-Party Payment Processor Licenses




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