American Express Brings Its Brand of Mobile Payments to China

November 13, 2018         By: Steven Anderson

It’s big news for American Express as it’s recently received received permission from the Chinese government to operate within the country, as part of a joint venture with fintech operation the Lianlian Group. It’s not complete permission as yet, and represents just one step among several that the operation has yet to take. Yet, it’s easy to see American Express will face plenty of trouble ahead with China as its latest stop.

First, the joint venture is established, and that will help American Express get a payment network up and running. However, the joint venture will also need a business operating license, a separate approval process, before anything can be realized from this. American Express now has 15 months to set up a clearing network, which was one of the biggest reasons that American Express got as far as it did.

Back in 2015, China announced plans to open its domestic processing network to outside firms, and American Express managed to land approval as part of a “goodwill gesture” that was intended ahead of a summit between Chinese President Xi Jinping and United States President Donald Trump.

Given that UnionPay actually controls 90 percent of the market—around 6.7 billion bank cards’ worth of market in circulation, at last report—bringing in some extra firms to split some of that market up could prove helpful to getting payments processed faster. American Express will have plenty of help here, as Lianlian is the largest third-party payment service in China that isn’t itself a bank.

Without those factors working in its favor, American Express might have had a much tougher go of things than it would have otherwise. Chinese firms routinely outperform other countries’ firms in China because of several regulatory issues seemingly designed to hobble foreign firms in the market. Throw that on top of the fact that there are already several operations in China already that have had years to become entrenched as well as an overall cultural opposition to the credit card and American Express might have been torpedoed before it even got off the ground.

Still, American Express might be in the right position going forward, and could make a decent pot of cash taking some business from UnionPay. UnionPay’s response to this, meanwhile, should also be something to see.