Four overseas banks, including HSBC and Citigroup, filed
applications yesterday for issuing renminbi bank cards, the banking
regulator said yesterday.
The four lenders - the other two being Standard Chartered Bank
and Bank of East Asia - will possibly be able to expand to the bank
card business this year, the Shanghai office of the China Banking
Regulatory Commission (CBRC) said in a statement yesterday.
The Beijing-based CBRC announced this week that it has launched
a procedure for locally incorporated overseas financial
institutions to apply for renminbi bank card business licenses.
Analysts said the participation of overseas banks will result in
a more competitive debit and credit card market on the mainland,
where the level of profit generated from the business is only half
of the world average.
The local banking regulator yesterday said local entities of the
four institutions are the first group to apply for permission to
issue bank cards on the mainland, and their application will be
reviewed by CBRC's Shanghai office before being forwarded to the
Beijing headquarters.
In the statement, the regulator didn't say whether the banks
were applying for licenses for debit or credit cards, or both, but
Wang Huaqing, chief of CBRC's Shanghai office, said overseas banks
were limited to issuing debit cards for now.
"Currently, we are receiving applications only for debit card
issuance because of the current banking rules," Wang said on the
sidelines of a banking summit, titled "Future of Banking in China
Conference", in Shanghai yesterday.
Analysts warned that the profit margin of the credit card
business on the mainland could be very thin as competition heats
up.
"It's a huge challenge to generate profits from the credit card
business in China," said Jeffrey Chen, president of China CITIC
Bank's credit card center.
Usually the income from bank cards is generated from merchants
commission, interest income and annual fees.
However, merchants commission on the mainland is only one-fourth
to half of the highest level in the world, while interest income is
much lower than the average level in Europe and other regions in
Asia, and annual fees are always exempt on the mainland, where
price wars are a common feature, Chen said.
"So you need to look before you leap. You have to guarantee
quality services for customers while generating reasonable
profits."
(China Daily June 8, 2007)