INTERVIEW-UnionPay expansion not threat to Visa, MasterCard

SHANGHAI, Nov 6 - China UnionPay, the country's sole bank card processor, aims to become a globally competitive brand on the back of China's rising influence, but its overseas expansion won't pose a threat to Visa or MasterCard at least in the short term, President Xu Luode said.

"Our vision is to make UnionPay an international bank card organisation with influence and competitiveness globally," Xu told Reuters, adding the company aims to expand card use and acceptance to 100 countries or regions by 2011, from 67 now.

But Xu, a former central banker, played down UnionPay's potential challenges to bigger rivals Visa or MasterCard, saying UnionPay lags behind them in international businesses and is still at an early stage of global expansion.

The company is by no means a small player. In the Asia Pacific region, seven-year-old UnionPay is already the second-biggest brand in terms of transaction volume, beating 40-year-old MasterCard and lagging only 50-year-old Visa, according to The Nilson Report, an industry publication.

With 2 billion UnionPay-branded cards, the company is the world's biggest bank card organisation in terms of issuance.

The swift rise of state-backed UnionPay has been helped by the company's monopoly status in a country with 1.3 billion people, but will be increasingly driven by the company's foray into new markets.

UnionPay has been rapidly expanding use and acceptance networks globally, so that Chinese people can easily take cash, buy gifts and pay for services electronically when they travel aboard, Xu said.

GOING ABROAD

The next step is to promote issuance of UnionPay-branded cards aboard, which would facilitate payment by foreigners, especially those who often travel to China.

Currently, about 30 financial institutions in Hong Kong and Macau and more than 10 institutions in other countries, including South Korea's 11 major banks, Japan's Sumitomo Mitsui Banking Corp, and Singapore's United Overseas Bank have issued cards with the UnionPay logo.

"As China's economy grows, more and more foreign financial institutions and cardholders will want to join UnionPay's network," Xu said. "Eventually, we hope that UnionPay cards will be issued globally, and used globally."

UnionPay started its international expansion in 2004, and the business has been doubling annually since, with growth accelerating outside the Asia Pacific region in recent years.

Rapid overseas expansion by UnionPay threatens to hurt relations with rival Visa, operator of the world's largest retail electronics payment network, whom it also partners with in some areas.

Visa had tried to limit the use of the UnionPay brand overseas, the Economic Observer, a Chinese newspaper, reported on Sept. 12.

"Visa and MasterCard are long-established brands and they have a great deal of advantages in the bank card business," Xu said, declining to comment directly on the report.

"We have always been respectful of them. We don't compete with them deliberately; we just stick to our own goals."

When asked if UnionPay or any of its units had plans to list, Xu said: "UnionPay currently has no plans for an IPO. It's premature now to talk about listing."

UnionPay's card transactions jumped 34.2 percent in 2008 from a year earlier to $739.49 billion. In comparison, Visa's card transactions rose 20 percent to $4.2 trillion, while MasterCard posted an 11 percent rise in transactions to $2.5 trillion.

Shanghai-based UnionPay, which was set up with the help of China's central bank and with more than 80 Chinese financial institutions as its shareholders, has a monopoly of China's interbank card payment services.