China UnionPay Targets U.S. ISOs

U.S. Bankcard Services Inc., an Industry, Calif.-based ISO, has added China UnionPay card acceptance to its list of merchant services.

The ISO is one of five that China UnionPay’s U.S. office in Jersey City, N.J., has signed to date, Hang Jia, China UnionPay chief representative for the Americas, tells ISO&Agent Weekly. Other China UnionPay ISOs are in New York and Dallas.

Launched in 2002, Shanghai-based China UnionPay Co. Ltd. is China’s national electronic-payments network and card brand. The company’s latest strategy has been to expand its presence internationally. 

Of the 2.07 billion cards issued overall in China, about 1.88 billion, or 91%, are debit cards, and the rest are credit cards.

U.S. Bankcard Services anticipates tapping into UnionPay cardholders traveling to the United States, the company notes in a release.

Chinese travelers want to use their China UnionPay credit and debit cards, but for different purposes, Jia says. They use their credit cards for hotel, air and car-rental services, but they prefer to use their China UnionPay debit cards for regular expenses and for luxury goods while traveling, he says.

Typically, China UnionPay credit lines are low compared with credit cards issued by U.S. banks, Jia says. A $7,000 China UnionPay credit line is very large and not typical, he says, noting Chinese banks also typically do not temporarily increase credit limits.

Jia anticipates China UnionPay signing more ISOs, but the issuer has run into obstacles. “We have merchants calling us wanting to know how to enable China UnionPay acceptance,” but none want to switch ISOs, and the ISOs are reluctant to add China UnionPay acceptance, he says.

“Their ISO is not very positive about adding China UnionPay because they feel Visa and MasterCard acceptance are enough,” Jia says, noting ISOs tend to act only when the merchant presents a clear business case to add UnionPay acceptance.

More than 1 million U.S. merchants accept China UnionPay debit cards, but most do not realize it, Jia says. A 2005 deal between Discover Financial Services and China UnionPay enabled reciprocal acceptance on each network.

China UnionPay debit card transactions operate on Discover’s Pulse debit network, which has 1.7 million U.S. acceptance locations, while China UnionPay’s credit transactions flow through the Discover network.

To help get past some of these obstacles, UnionPay will help cover some of the merchant’s cost, such as paying for signage and education, Jia says. “We can share the cost,” he says.