Cross-border flows are increasing with astounding speed in Asia-Pacific and more specifically China
Transaction banking in China and across Asia-Pacific as well as credit card processing insights were highlighted at ACI’s Customer Connect held earlier this summer in Hangzhou. This well-attended event brought together management from China’s main banks and card processing organizations as key participants.
One of the major themes discussed and debated was the change(s) in China’s cross-border corporate and retail banking. In the latest SWIFT RMB (Reminbi, aka the Chinese Yuan) tracker report, usage of the RMB in cross-border trade involving Hong Kong and China increased 36 percent (to 12 percent of the total volume) and will continue to grow rapidly. The RMB also jumped to 7th place in the ranking of world payments currencies with 1.55 percent of total payment volume.
China is building its own global payments solution, China International Payments System, to accommodate this growth. Although originally planned to have been launched already, it will not be out until 2016 according to forecasts by industry experts. And, once online, its future is not completely clear, as the market will likely look to choose the most reliable and user-friendly product, meaning incumbent players like clearing banks in offshore clearing centers.
With such impressive growth, scalable resilience and experience are essential. Even banks in established markets such as Singapore face problems—a prominent Singaporean bank had a failure of its online and branch banking systems in 2011 that led to a supervisory action from the Monetary Authority of Singapore; international transactions only add to complexity.
On the consumer side, spending with Chinese bankcards overseas grew from USD2.9 billion in 2008 to USD68.9 billion in 2013. According to a recent UnionPay International announcement, transactions by Chinese consumers and UnionPay cardholders jumped 30 percent in the first six months of 2014 over the same period a year earlier, with popular destinations expanding from Southeast Asia to North America and Europe.
However, international and inter-regional bankcard processing is still a relatively new venture for Chinese card issuers and processors; a few foreign banks in Greater China have even had troubles in the past when shifting from legacy payment networks to UnionPay in order to comply with Hong Kong’s Monetary Authority’s plan to switch to IC cards. Complicating things further, the credit card industry is facing increasing competition from new payment disruptors—both online and mobile 3rd party payment providers.
Cross-border flows are increasing with astounding speed in Asia-Pacific and more specifically China, which will continue to be a leading force in growth of the regional fund movement. To make the best of arising opportunities, the country has to embrace the latest technological solutions and proceed decisively with establishing itself as a main transactional hub for the region.
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