Mastercard (MA) - Get Report on Tuesday said it received “in-principle approval” from the People's Bank of China, the country's central bank, to set up a bank card clearing business in China, granting it access to the country's $27 trillion payments market.
Mastercard and its partner, NetsUnion Clearing Corp (NUCC) will need to complete preparation work within a year, at which point the company will be able to apply for formal approval to begin domestic bank card clearing activity, Mastercard said.
Mastercard's application was submitted by Mastercard NUCC Information Technology (Beijing) Co., Ltd, a joint venture of Mastercard and NUCC.
“China is a vital market for us and we have reiterated our unwavering commitment to helping drive a safer, more inclusive and seamless payments ecosystem for Chinese consumers and businesses,” Mastercard CEO Ajay Banga said in a statement.
The approval not only represents China’s ongoing efforts to open up its capital markets to outside participants like Mastercard, it also symbolizes its commitment to reforming and updating its capital markets and payments network to make it more integrated and global - something it agreed to as part of the recent phase one trade agreement with the U.S.
As part of the recently signed trade accord, Chinese regulators said they would take no longer than 90 days to consider applications from providers of electronic-payments services such as Mastercard, Visa V and American Express AXP. Mastercard set up its majority-owned joint venture nearly a year ago.
The approval means the credit-card and payments processing giant will soon be able to offer Chinese consumers and businesses the ability to provide and receive payment for goods and services with Mastercard- something they were previously unable to do.
It also means it will be competing with the likes of state-run banks and credit providers including state-run China UnionPay, which until a few years ago was the only credit clearing provider in the country.
In June 2015, the Chinese government eased rules to allow foreign bank-card clearing providers to obtain licenses by setting up units or acquiring a local company.
American Express also recently cleared a key hurdle in its bid to accessing China after the central bank last month accepted its application to start a bank card clearing business.
Mobile transactions topped 190 trillion yuan ($27 trillion) in China in 2018, making it the world’s largest such market, according to iResearch.
Shares of Mastercard were up 1.24% at $334.28 in trading on Tuesday.