US based payment card companies, including American Express (AXP.N), MasterCard (MA.N) and Visa (V.N), are preparing to submit license requests to operate in China within months, according to three people with direct knowledge of the matter.
The long wait for the U.S. companies is, though, unlikely to end soon. It may take as long as two years or more for the companies to clear all official scrutiny, including from banking regulators, and for them to pass a security review, as well as meeting other conditions, the sources said.
The move comes against a backdrop of growing economic friction between China and the United States, after the two countries failed on Wednesday to agree on major new steps to reduce the U.S. trade deficit with China.
U.S. payment network operators have been waiting for more than a decade to get access to China. It is set to become the world's largest bank card market by 2020, when the number of cards in circulation is forecast to rise to 9 billion from 6 billion in 2016, according to research firm GlobalData Plc.
China first agreed in 2015 to open the card market to local and foreign businesses, a move triggered by a 2012 World Trade Organization ruling. However, foreign card companies have been unable to set up local operations in the absence of a clear roadmap from Chinese authorities.
In May, Beijing and Washington agreed to a July 16 deadline for China to issue "necessary guidelines" for the launch of local operations by U.S. payment network operators, leading to "full and prompt market access".
The expected entry of foreign card companies will challenge the dominance of state-backed China UnionPay Co Ltd, which currently is the sole operator in a yuan bank card payment network worth more than $8 trillion in China.
"It's exciting that the uncertainty is finally over and they have finally come out with the rule book, but it's not going to be a fast and smooth journey," said one of the people with knowledge of some of the U.S. payment companies' plans.
The people said the applicants would be subject to intense scrutiny by the banking regulator as well as security agencies. The companies will also have to set up extensive local infrastructure.
An American Express spokesman said it will apply for a license as soon as possible. "The PBOC's guidelines clearly set forth the process ... and we're continuing to work with different regulators as we move through this process," he said.
US based payment card companies, including American Express (AXP.N), MasterCard (MA.N) and Visa (V.N), are preparing to submit license requests to operate in China within months, according to three people with direct knowledge of the matter.
