China UnionPay considers direct interface for collecting payments and majority of third party payment providers would start losing their profits
August 27, 2013 Leave a comment
China UnionPay considers direct interface for collecting payments
Staff Reporter
2013-08-27
Total online payments in China in 2014 are projected to touch 8 trillion yuan (US$1.3 trillion) and the billions generated in credit card transaction fees are expected to trigger an intense competition. When a purchase is made at an online shop worth 100 yuan (US$16) via credit card through Alipay on an e-commerce site like Taobao, the store has to pay 1 yuan (US$0.16) to the bank in lieu of a service fee. The distribution of that single yuan per transaction between the card issuing banks, payment processors and cleaning houses has created a battle for profits. China UnionPay wants to set up a direct interface that will allow it to collect payments itself. As a result, a majority of third party payment providers would start losing their profits, reports Shanghai’s First Financial Daily.Also mentioned was China UnionPay’s recent attempt to set up a third party payment provider service. Under the plan, a proposal was submitted in which the bank mulled stopping an open payment interface for non-financial institutions beginning in September. Each member bank would then establish a unified pricing mechanism and the fees would not be lower than the standard rates determined by the bank’s management committee.
Yet the process will likely not be that simple. The bargaining power of some third party payment providers is too strong to negotiate with banks. There are already some dominant third party payment providers operating in the market, but some believe that personal information privacy may be threatened by the amount of information some providers collect.
A UnionPay document showed that major member banks’ online transaction fee payments in China exceeded 3 billion yuan (US$490 million) a year.
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