China UnionPay to Grab Chunk of Booming E-commerce

September 16, 2024         By: Jason Mongiello

China UnionPay, a government backed bankcard provider, will work to take a cut of online transactions in China.

Between April and June, $196 billion was transferred through online transactions. Bain & Company, a consultancy agency, predicts that the Chinese will spend $1.5 trillion in the next three years in e-commerce.

China UnionPay is the sole provider of bankcards in Mainland China and was founded in 2002 as a payment processor between partnerships of China’s largest banks.

According to the China Economic Review, China UnionPay will charge up to 0.55% on each transaction that is processed by third parties.

China UnionPay is a latecomer to e-commerce.

Alibaba, the largest third-party payment processor in China was the first to provide online payments in escrow for Chinese consumers in 2004, and was a digital alternative to a banking system still running on paper.

It seems as if the People’s Bank of China wants all transactions to run through China UnionPay as evidenced when a Chinese payment processor was barred from dealing with MasterCard this May.

If China UnionPay has its way, it will be able to corner all third-party payment processors. This means higher fees all-around since there will be little to no competition in this monopoly, and consumers will have to foot the increased rates.

In the end, the PBoC controls regulation and policies, but there is greater incentive for the state if China UnionPay is granted the ability to monopolize.