Visa Inc.'s rule on using only its clearing system for international transactions on dual-currency credit cards has existed for many years, and it applies for all Visa cobranded credit cards, Visa said in a statement to PaymentsSource.
Visa earlier this week asked its member banks to stop using China UnionPay’s system to settle international transactions initiated with bankcards bearing both the Visa and UnionPay logo, threatening them with fines of US$25,000 per month if they refuse to do so (see story.)
“If a Visa card is processed through other parties' networks, there is the potential risk that the functionality, support and cardholder rights, which are offered by Visa, could be impacted. This could also negatively impact consumers’ confidence in both Visa’s payment system and brand,” the statement notes.
China UnionPay has been expanding its acceptance and issuance around the world in recent years, presenting itself as a strong rival to other international credit card organizations, including Visa. China UnionPay contends it gives holders of cobranded dual-currency credit cards various advantages, including favorable exchange rates and lower fees to make it advantageous for Chinese travelers to use its processing network.
In its statement, Visa says it welcomes competition and looks forward to the cooperation with China UnionPay in the future.
But the chance for the cooperation is remote, Li Hong, a professor at Shanghai University of Finance and Economics, tells PaymentsSource.“It could affect Visa's further expansion in China, as all cobadged, dual-currency credit cards have to be approved by China UnionPay,” he says. “It will likely intensify the conflict between Visa and China UnionPay.”
The impact of Visa's rule on China UnionPay likely be minimal, Li says. “China UnionPay needs to work with local banks and increase its own terminals abroad. There will be a lot of work to do.”
Meanwhile, PaymentsSource sister publication American Banker reports that American Express Co. does not plan to take action similar to Visa's, while MasterCard declined to comment.
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