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)