Su Ning: Development of the bankcard industry in China
Speech by Mr Su Ning, Deputy Governor of the People's Bank of China, at the National Bankcard
Work Conference, Beijing, 25 April 2006.
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Ladies and Gentlemen:
In February 2001, PBC hosted the first national bankcard work conference. At that conference, a
series of work priorities were identified, which greatly promoted the development of the bankcard
industry. The priorities include setting up a uniform business and technical standard, accelerating the
development of national bankcard network, promoting a uniform CUP brand, and reforming bankcard
management system. Today, the national bankcard work conference is held again jointly by the PBC
and other ministries. The objective of this conference is to, under the guidance of Den Xiaoping
Theory and the important thoughts of "Three Represents", summarize past successful experiences,
analyze current challenges, implement policies and measures set forth by the Several Opinions
Regarding the Development of the Bankcard Industry formulated by nine ministries, outline work plan
for future development, and promote rapid and healthy development of the bankcard business by
adopting a scientific development concept to build a harmonious society. Mr. Jiang Dingzhi, Vice
Chairman of the CBRC, Mr. Lou Qinjian, Vice Minister of Commerce, Mr. Xu Shanda, Deputy
Administrator of the State Taxation Administration, Mr. Zheng Shaodong, Assistant Minister of the
Ministry of Public Security, Mr. Zhang Hongli, Assistant Minister of the Ministry of Commerce, and Mr.
Li Dongrong, Deputy Administrator of SAFE attended this conference and delivered speeches. Now,
on behalf of the PBC, I'd like to say a few words:
First, achievements of bankcard industry
The CPC Central Committee and the State Council have always attached great importance to the
development of the bankcard industry. In December 2001, Comrade Wen Jiabao clarified the
"threeone-four" objective for the building of a national bankcard network and the bankcard acceptance
market in the tenth "five-year" plan period. As for other important issues such as the legal framework,
the prevention of bankcard risk and the security of financial information, Comrade Wen Jiabao and
Comrade Huang Ju also made important instructions, clarifying the direction for future development.
Especially recently, Comrade Wen Jiabao made important instructions on extending bankcard
coverage and further improving Beijing's bankcard environment as an Olympic host city. So under the
leadership of the CPC Central Committee, with the support of relevant departments and government
at various levels, China's bankcard industry has made great achievements through joint efforts of the
commercial banks, users and China Union Pay (CUP).
First, bankcard has been used more frequently and extensively
By the end of 2005, there are 175 issuers of bankcards with the total issuance of 960 million. In 2005,
the total bankcard transaction volume amounted to 4700 billion yuan, including 960 billion yuan of
consumption transaction, which is 10.4 times and 8.5 times as much as that of 2000. The number of
merchants accepting bankcards, POS machines and ATMs is 390,000, 610,000 and 80,000
respectively, which is 3.5 times, 3.9 times and 2.1 times as much as that of five years ago. More and
more people have got used to the use of bankcards, and excluding the wholesale and real estate
transactions, the proportion of consumption related bankcard transactions out of the total retail sales of
consumer goods increased from 2.1% five years ago to nearly 10%. In some economically developed
cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, the proportion is more than 30%, which
is near the level of 30%-50% of developed countries. As commercial banks constantly innovate
bankcard products and services, its functions, transaction channels as well the coverage have been
improved. For instance, the function has been enriched from cash deposit & withdrawal and
consumption to investment and financing. The transaction channels have been extended from
traditional platforms such as POS machines and ATMs to new payment channels like on-line banking,
and telephone banking. And the coverage has also been enlarged from consumption area such as
restaurants, hotels and retail shops to public services and wholesales such as hospitals and schools.
The constant innovation of bankcard product, a wider coverage and diversified payment channels all
meet the payment demand of card holders and promote the use of bankcard. Currently, bankcard is
the most frequently used non-cash payment instrument by individuals.
Second, a national bankcard network has been basically set up
To accelerate the build-up of a national bankcard network, as approved by the State Council, China
Union Pay (CUP) is set up by the People's Bank of China. CUP specializes in the construction and
operation of a national integrated system of information exchange of bankcard and networking the
national bankcard as a whole. Commercial banks greatly support this system, and they have
standardized and updated their own system and terminals, which is crucial to the emergence of a
national bankcard network, the improvement of the acceptance environment and the overall sector
development. With the joint efforts of PBC, commercial banks, CUP and relevant departments, the
"three-one-four" objective for building a national bankcard network was achieved. In 2003, the network
covering prefecture-level (or higher) cities has been basically set up, and in 2004 the network
gradually covered some economically developed counties. So a nationwide bankcard network has
been basically formed. A uniform business and technical standard has also been formulated. The
promulgation and implementation of Business Standard for Bankcard Network, Technical Standard for
Bankcard the Information Format and Usage Standard for Bankcard Magnetic Stripe
Network,
information, the Standard for Financial IC Card (2.0) provides the basis for the national integrated
network. The upgrade and consolidation of bankcard system by commercial banks improved their card
acceptance and risk-prevention capability, and the internationally advanced inter-bank transaction
network set up by CUP provided technical support for both centralized processing of domestic
interbank transactions and cross-border transactions. In November 2004, the inter-bank transaction
system was successfully connected with the PBC large-value payment system, which means the
interbank real time payment and settlement can be conducted through bankcards. In the past few years,
the quality of the nationwide system has greatly enhanced, the efficiency of error correction has
improved, and the success rate for local and trans-regional transaction has increased from 83.1% and
61.7% to 96.8% and 95.3% at the end of 2005.
Third, bankcard business chain has preliminarily emerged
With the advance of information technology and clearer division of labor, bankcard service sector is
becoming more and more professional. The payment business chain covering card issuance,
processing, information exchange and machine production has emerged, which is positive for the
integration of resource, the exertion of comparative advantage, the realization of economic scale and
the optimization of bankcard development mode. Some banks have established credit card center,
specializing in credit card business. The design, marketing and risk management of credit card has
improved. CUP also provides inter-bank information exchange service, and the inter-bank use of
bankcard as well the share of market resource and equipment lower operation cost. In terms of
specific service agencies for the design of issuance system, bankcard production, bankcard marking,
equipment production, equipment installment and acceptance environment, these agencies have
greatly increased efficiency, lowered cost, improved service and bettered the bankcard environment.
The contribution of bankcard industry to other industries such as financial industry, commercial
industry, tourist industry, bankcard and equipment manufacture industry, telecom industry, software
industry and e-commerce has materialized.
Fourth, further improvement of relevant measures and policy environment
When accelerating the legislative procedures of the Bankcard Regulation, with the aim to promote
Several Opinions Regarding the
sustainable development of bankcard industry, in April 2005,
Promotion of Bankcard Industry issued by the People's Bank of China (PBC), the National
Development and Reform Commission, the Ministry of Public Security, the Ministry of Finance, the
Ministry of Information Industry, the Ministry of Commerce, the State Taxation Administration, China
Banking Regulatory Commission (CBRC), and the State Administration of Foreign Exchange (SAFE)
clarified some important issues such as guidelines, principle, direction, target and priorities, which fully
exhibit the importance relevant departments attach to the bankcard industry.
Relevant ministries of the State Council also promulgated and implemented a series of feasible
measures and policies. As the supervisor, administrator and organizer of the payment system, PBC
has made great efforts in formulating rules and regulations, standardizing the acceptance market,
safeguarding bankcard security, promoting international use, improving technical standard, and
disseminating bankcard knowledge. Proposals on Promoting Development of the Bankcard
Acceptance Market
was issued in July 2005, and it clarified some important policy issues. As the
supervisor of banking institutions, CBRC also did lots of work in improving bankcard issuance and
internal control. Targeting some serious credit card fraud cases such as illegal encashment, the Notice
on the Prevention of Credit Card Risk
was jointly issued by the PBC and CBRC to prevent risk and
guarantee asset security. Together with other government departments, the Ministry of Public Security
organized nationwide campaigns against bankcard crimes. The Ministry of Public Security also set up
the bankcard risk prevention working mechanism with commercial banks and CUP to safeguard
bankcard security and to maintain financial order. The documents issued by SAFE such as the Notice
on the Standardization of the Administration of Foreign Currency Bankcard, and the Notice on the
Prevention of Credit Card Risk
met overseas card use demand and improved standardized
management. The Law of Electronic Signature, drafted by the Legal Office of the State Council, the
Ministry of Information Industry, and the Information Office of the State Council, has already been
passed by the Standing Committee of the National People's Congress. It provided legal guarantee for
bankcard online payment with instruments such as computer network and mobile phones. The
National Development and Reform Commission was busily engaged in pricing policies. The Ministry of
Commerce revised The Administrative Measures for the Write-off of NPL in Financial Companies,
which standardized the procedure for the write-off of bankcard's NPLs. The Ministry of Commerce
encouraged marketing and distribution companies to accept bankcards. The State Taxation
Administration, the Ministry of Finance and the Ministry of Information Industry also organized pilot
projects to popularize the use of tax control POS machines. All these efforts provide a sound external
environment for bankcard's development.
Fifth, overseas acceptance of RMB bankcard
To accommodate the national strategy of stimulating outbound business activities, and to satisfy
overseas travel and consumption need, China's bankcard payment system becomes more and more
integrated with international payment system. Since 2004, with the support of relevant departments
and issuers, CUP actively explored overseas market. By now, nearly 20 countries and regions have
accepted CUP cards. By the end of 2005, 29,4000 overseas shops and merchants accept CUP cards,
totaling 45,300 POS machines and 62,300 ATM machines. And the value of annual overseas
transaction reached about 13 billion Yuan. The overseas acceptance of CUP RMB card signaled
China's national bankcard branding has delivered expected results.
All these achievements can not be separated from the guide of CPC Central Committee and the State
Council, the attention and support provided by relevant departments, the innovation, coordination and
great efforts of commercial banks, shops and merchants, and China Union Pay, as well as the
involvement and support of general public especially the consumers. So here I'd like to express my
sincere thanks to commercial banks, shops and merchants, CUP and all friends who have contributed
to and supported the development of bankcard industry.
Second, the significance and challenge of bankcard industry
The development of bankcard industry is beneficial both to the country and to the people. It bears
great significance to stimulate consumption, reduce cash circulation, lower transaction cost, enhance
anti-money laundering, broaden tax base, improve international image and promote the development
of relevant industry. Its contribution is reflected in the following aspects: First, promote economic
development. Cash replacement function and consumption credit function of bankcard can turn
potential and random consumption into real expenditure, which in turn boost domestic demand and
promote the development of tertiary industry, such as trade and commerce, tourism, hotel and
ecommerce. The improvement of bankcard transaction environment will promote the development of
relevant sectors such as telecom, equipment production and software design. According to the
research on 50 countries whose bankcard industries are more developed, when the proportion of
bankcard payment among aggregate consumption payment is increased by 10%, GDP is to be
expanded by 0.5%. Second, lower social transaction cost. More frequent use of bankcard can reduce
expenditure in the production, transportation and reserve of cash, and therefore improve economic
efficiency. Third, standardize market order. Bankcard payment can automatically form payment record.
The enhanced payment transparency can improve tax administration, increase tax revenue, control
illegal income, prevent and curb corruption. Fourth, improve social courtesy. Bankcard is convenient,
safe and clean, and it's good to foster good payment habit and improve city image. The cyclical credit
consumption function of credit cards can nurture honest habit, and promote social credit culture.
Currently, bankcard industry is confronted with good opportunities. China is trying to build a well-off
society and has entered the stage of building a socialist harmonious society. The national strategy to
boost domestic demand and stimulate consumption provides favorable condition for the development
and innovation of bankcards. The set-up and improvement of the national credit database for
individuals provides good credit environment, and we also accumulate lots of experiences. More
importantly, the 11th "five-year" program proposes that we should actively develop financial service
industry and raise the proportion and improve the performance of service industry, grasp core and
crucial technology, to prompt its development and innovation. This will present new opportunities, and
the bankcard industry will enter the consolidation and innovation stage.
There are still some problems and challenges. First, the development of the acceptance market has
become the bottleneck restricting bankcard sector. Compared with overseas mature bankcard market,
some indicators such as the consumption ratio for cardholders, the frequency of card use, and the
number of merchants accepting bankcards all left far behind. Currently, the accepting environment
doesn't reach the financial service level as an Olympic host country. Bankcards are mainly used to
deposit and withdraw cash, which means the payment function doesn't exert fully, and cash
transaction remains a large proportion in retail payment. The acceptance market doesn't develop in a
balanced way, and in rural areas as well as in the medium and small-sized cities, the acceptance
environment is weak, and the ratio for medium and small-sized merchants accepting bankcard is low.
Second, the competition of the bankcard market still stands at the low level, and branding, service, as
well as innovation awareness is weak. Third, bankcard risk is a prominent problem, and risk
management needs to be improved. Fourth, legal framework is not compatible with sector
development, and policy support is not enough. Fifth, as China opens wider to the outside world,
foreign-funded financial institutions will bring lots of competition pressure. Especially with the end of
China's post-WTO transitional period at the end of this year, domestic institutions have to face more
severe competition.
Faced with all these opportunities and challenges, especially all these problems, we should make
unremitting efforts to promote further development of the bankcard sector.
Third, the outlook of bankcard industry
The Several Opinions
The major task for next stage is to adopt effective measures to implement
Regarding Promoting Development of the Bankcard Industry, stick to market-oriented direction, center
on the improvement of acceptance market, enrich bankcard type and function, promote bankcard
innovation and improve risk management. On this basis, we should further improve legal system, give
more industrial support, encourage innovation, enhance technological standard, standardize market
order, lower risk, and provide safe, quick and good bankcard service. The working priorities should go
to following aspect.
First, improve bankcard acceptance.
Acceptance market is the basis, and the improvement of accepting mechanism and environment as
well as a wider coverage is the current priority. By 2008, China expects bankcard will be accepted by
60%, the merchants with the annual turnover above1million and 25% of merchants with the annual
turnover less then 1million respectively.
To achieve the above goals, the coverage of bankcards should be extended, new channels for the
cooperation between banks and merchants should be explored and the use of bankcards in business
distribution should be promoted. Besides, designated merchants in medium and small-sized cities as
well as in counties with brisk economic activities will be nurtured to promote the use of bankcards, and
in this way an unbalanced acceptance market development will be improved. Bankcard should be
encouraged in the payment of tax, public service and other services such as public health and
transportation.
The national bankcard network should be furthered improved. CUP will enforce a uniform standard in
business operation and technology in prefecture-level cities (or above) and economically advanced
counties. On the condition that acquirers can choose network interface by their own, they are
encouraged to link with CUP network directly, while the CUP supports versatile direct or indirect links.
A uniform standard for inter-bank bankcard transaction will be enforced, and both business and
technical standard will be standardized. The level of acceptance in hotel and hotel-like business
should be further improved, and no subjective obstacles are allowed to violate the uniform standard.
Special support goes to the acceptance of the pre-authorization of bankcards by medium and
smallsized banks. The PBC will organize relevant departments to upgrade system and terminals and work
on the monitoring, inspecting, punishing and rewarding mechanisms on standard enforcement. In this
way, the business and technical standard will be implemented strictly and the success rate of
interbank bankcard transaction is to be increased to be above 96% in 2008.
Bankcard environment in Olympic game cities should be bettered. In line with the important instruction
by Premier Wen Jiabao to extend the coverage of bankcard for a better environment for the 2008
Olympic Games, six Olympic game cities such as Beijing, Shanghai, Tianjin, Shenyang, Qin
Huangdao, and Qingdao, will actively take measures to improve both acceptance environment and
accommodating financial service facilities, so as to promote the use of bankcard in the whole country.
Olympic game cities should figure out their own bankcard development plan to clarify overall
objectives, major tasks and implementation measures. The scheme to improve the acceptance of
foreign currency denominated bankcard should be drawn up as soon as possible, and merchants are
to be well prepared for the acceptance of international IC card. Newly installed bankcard machine
should be compatible with both magnetic card and IC card. Inspection and monitoring of the technical
conditions should be improved to ensure inter-bank acctptance, which means both inter-bank
information transfer system and intra-bank system should operate in a safe and steadily way. Risk
management should also be improved, and commercial banks should draft technical security plan.
Fiscal and taxation policies will be formulated to support the use of Olympic bankcard. The tax control
POS machines will be popularized and medium and small-sized merchants will be encouraged to
accept bankcard. Centering on the Olympic theme, bankcard knowledge will be disseminated in
various ways to create a better media environment.
In terms of improving financial services for the development of rural area, the agricultural industry and
the farmers, bankcard industry should play a bigger role. The experience accumulated from pilot
program in Guizhou for migrant workers should be popularized. More banks are encouraged to offer
this kind of service, and its cover age should be extended to other migrant worker outflow provinces
other than Guizhou. Rural Credit Cooperatives in migrant worker export area should offer good cash
withdrawal service at counters, standardize business operation, and improve security control. As for
migrant worker inflow area, migrant workers should become more aware of bankcard use, and issuers
should also provide better service. The PBC will continue to coordinate, mobilize and guide relevant
parties to place more attention to providing specific bankcard service for migrant workers.
The management over card acceptance market should be standardized. The requirement set forth by
Several Opinions Regarding Promoting Development of Bankcard Industry
on the set-up and
improvement of pricing mechanism should be implemented seriously, and acquiring agencies and
merchants should negotiate pricing issues on market basis. Acquirors should sign contract with
merchants in line with legal requirements and market-oriented principles, fulfill their payment
obligations, gain relevant profits and undertake correspondent risk. Qualified institutions and
organizations should try to create a fair playing ground, and strengthen risk control. The rights and
obligations between acquiring institutions, shops and third-party service provider should be clarified.
The set-up of acceptance market in areas where CUP doesn't have a branch should be accelerated,
so the national inter-bank bankcard market could develop in a coordinated way.
Second, issuing service will be improved to satisfy the need of customers
Bankcard business is an important component of intermidiary business and personal financial
business. Bankcards issuing institutions such as commercial banks should stick to the principle of
"service is the priority", and constantly improve their management by providing qualified, safe and
efficient service with cards of different types and functions.
Increasing types and functions of bankcard and improving business profit. Issuers such as commercial
banks should rely on the set-up of their own bankcard brand to enhance core competitiveness. Being
active, innovative and initiative and catering to the needs of market, the management level should be
enhanced to improve business profit. Research on customer needs should be deepened, and
bankcard products to satisfy the daily payment should be developed. Efforts should also be made to
expand the value-added service function of bankcard. Commercial banks are encouraged to full play
their advantage, segmentize customer market, and increase cardholders by providing tailor-made and
differentiated service. Service awareness should also be enhanced, and good service will lead to
wider bankcard coverage. Special attention should go to vulnerable group in the society, which will
contribute to the good image of banking service. Internal management should also be improved,
including the set-up of the cost accounting system(that records the cost and profit of all bankcards),
the adoption of centralized, professional and scale management, and the activation of domain cards.
On the condition of risk prevention, credit card industry should develop steadily. Credit card
development can expand consumption credit, which is positive to boost domestic demand. Because
Credit cards are riskier than debit cards, and the overdraft awareness of Chinese citizens are quite
different from foreigners, commercial banks' risk control and management capability should be
improved. Currently, credit card only accounts for 4% of the total bankcards, and only 1% of credit
cards with rolling credit limits. So Credit card has great potential for development, and we should
steadily promote its development on the basis of effective risk prevention. Issuers such as commercial
banks should analyze the business mode with respect to financial management, risk control and
stimulation mechanism, and actively explore management system and development mode with
Chinese characteristics.
The development of public service card should be actively promoted. Management measures for pubic
service card of central budget institutions should be formulated as soon as possible, and bankcard
should be widely used in central budget institutions where state treasury management reform is
conducted. Daily business expenditure such as business expense and conference fees as well as
some purchase cost should be paid via bankcards. The experience accumulated form such pilot
project should be summarized, and public service card should be popularized in big and medium-sized
cities. Pilot grogram can be carried out in possible cities, and experience accumulated from such
program should be digested. Issuers such as commercial banks and CUP should work closely with
fiscal departments for the conduct of pilot program and popularization of credit service card.
Multi-function IC card should be applied in a rational way. On the basis of stable development and
operation of magnetic card, issuers such as commercial banks are encouraged to issue electronic
wallet-like IC card for small-value payment. Domestic issuance of IC card should be subject to both
The Standard (2.0) of China's Financial IC Card and the uniform business and technical standard, so
technical advance, compatibility, and application can be guaranteed. Second, pilot grogram for IC card
should be conducted in various sectors. The PBC will strengthen its cooperation with competent
departments in other sectors, set up management coordination mechanism, draw up blueprint for
cross use of bankcard and sector card, actively guide the integration of different sector card standard
with that of financial IC card, promote financial IC card to become the major IC card standard, and
achieve coordinated development. Third, commercial banks are encouraged to enter other sectors
through the issuance of joint-branding card, which is basis for the final integration. Commercial banks
should also pay close attention to the operation, financial situation and fund use of their card
coissuing partners, so possible risks can be prevented. Fourth, the scope of use as well as the credit
limit should be clarified to prevent fund risk. Duplicated investment and waste of resources should be
avoided, because they could lead to disorderly competition.
Stick to innovation and more efforts go to the set-up of bankcard with Chinese IPR.
In line with the guide and requirement of the 11th "five-year" program, unremitting efforts should go to
the improvement of self-innovation capability of bankcard issuers. Bankcard standard and branding
with Chinese IPR should be built up, because our international competitiveness can be enhanced only
through our own efforts.
Providing a favorable policy environment to improve the innovative capability of bankcard market
players. Support should go to hi-tech industries, which has a close connection with the development of
bankcard sector, such as telecom, integrated circuit production, software design and operation
service. Designated companies can enjoy preferential policies to translate hi-tech achievement to real
production. Domestic technology and equipment are encouraged to be used in the bankcard industry,
and patent protection for relevant technological and business innovation is to be strengthened. The
whole system for the analysis, formulation, checking, verification, and maintenance of domestic
bankcard's standard should be set up, and the build-up of the verification system for related product
should also be accelerated. The dissemination and training for bankcard standard should be
strengthened, and the management for information security should also be improved.
Accelerating the formulation and implementation of industrial code for RMB-denominated card. The
BIN standard is in compliance with the international standard, and has been applied by CUP to ISO.
This technical standard not only provides internationally accepted technical basis, but also stands as
the key to build up China's own bankcard brand. This standard should also become the only core
technical standard for our bankcard innovation, and the basis for RMB card standard with our own
IPR. The PBC plans to upgrade CUP BIN standard as the RMB card standard in the first half of this
year, and initiates the project of upgrading this standard as the national standard. The newly issued
bankcard with RMB account should adopt this technical standard, and change non-standard
bankcards into standard ones as soon as possible.
The issuance and acceptance of RMB bankcard should be standardized. First, the newly issued
bankcards should comply with the standard of the national bankcard network, and have CUP identifier.
Any RMB card in no compliance with the standard of international bankcard network is not allowed to
be issued. Second, domestic inter-bank RMB transaction should be connected with CUP network, and
no domestic RMB transactions are to be processed through foreign institutions. Third, strictly
classifying foreign currency account and RMB account when international dual-currency debit cards
are used abroad.
Centering on the set-up of international brand, service should be better provided. CUP should build up
all-around, high-level service system covering member institutions, designated merchants, and
cardholders. Overseas market, which has already accepted CUP bankcard, should be further
exploited, and the acceptance quality should be improved. Strictly complying with host country's laws
and regulations, cooperation with overseas bankcard institutions should be enhanced in a mutually
beneficial way.
Fourth, setting up risk management system to guarantee the security of bankcard information
and usage.
Risk management is significant both for a safe, efficient, and harmonious user's environment and the
long-term healthy development of the bankcard industry. In recent years, with the rapid development
of the bankcard industry, risky cases increase every year. Relevant departments should efficiently
conduct risk management, strengthen risk prevention system, improve risk prevention level, set up
bankcard risk prevention and resolve working mechanism, and guarantee the security of bankcard
information and use.
The security of financial information should be greatly emphasized. Bankcard payment system is an
important part of the national payment system. The analysis and process of transaction data and
customer information can reveal some information of the economic activity of cardholders, companies
and pubic service entities. To safeguard the security of financial information, domestic institutions are
encouraged to play a bigger role in the bankcard payment system. Issuers should build up domestic
data process and storage system. As for the domestic and overseas transaction of RMB cards and the
domestic transaction of foreign currency cards issu