Domestic payment cards chase VISA and MasterCard

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The Popularity of Domestic Payment Cards in China to Threaten The Strong Position of VISA and MasterCard, says research firm Timetric.

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International payment card giants, such as VISA and MasterCard may already own the majority of the Chinese market but should not be complacent, according to research by Timetric. Rising competition from domestic payment cards is set to alter the way VISA and MasterCard do business. The success of China’s UnionPay and India’s RuPay is expected to fuel this trend. With the ability to provide transaction facilities for up to 40 percent cheaper than international payment cards, domestic cards are projected to grow, especially in emerging markets such as China, India, Malaysia, Russia and Argentina.

International Card Networks Lag Behind

The emergence of government-backed payment card networks will play a crucial role in the redistribution of market share. They are predicted to lower the cost of transactions and help card services reach a larger market through increased competition. VISA and MasterCard have lagged behind in exploiting business opportunities in micropayments, social benefit programs, and the rural populations of small financial institutions. These relatively unexplored markets are becoming the primary focus of domestic card networks as they expand their business and increase revenues. Over the next five years, Timetric predicts that domestic cards will concentrate on small enterprises that do not currently accept card payments. This move will be aided by the availability of technologies such as mobile point of sale (MPOS) solutions, which will make acceptance of card payments feasible for smaller, more remote merchants.

Domestic Payment Cards Go International

Domestic payment cards are already spreading internationally. Chinese providers have taken the initiative and made agreements with businesses in areas with many Chinese tourists. This is a step in the right direction for domestic cards as outbound travelers from China are expected to surpass the number of outbound travelers from countries like the U.S. and Germany in 2013.

The Timetric report: 2020 Foresight Report: The Role of the Domestic Payment Card Network provides information and insights into the dynamics of domestic payment card networks globally and their increasing importance in emerging economies.

Photo: Declan TM/Flickr

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