Long frustrated at being shut out of China's domestic credit card market, Visa Inc. may have found some leverage to help it gain access, according to Dow Jones.
"Visa's blocking of [China UnionPay's] foreign channels is clearly designed as a warning aimed at prompting [UnionPay] into discussions about opening up access to the Chinese market," Michael Lafferty, chairman of the Lafferty financial industry research house, wrote in a research note.
Last week, Visa said it was reasserting what it claims is its right to process certain international payment transactions with credit cards that share its logo and that of China UnionPay Co., China's sole card network.
UnionPay has a monopoly on processing credit card transactions in China, but it has teamed up to co-brand cards with Visa and other major credit card companies so that its cards can be used in other countries where UnionPay's own network is still limited. So far this has proven to be the only way a foreign card company can get access to China's consumers — when they travel abroad.
The ploy could carry some risk, warned Lafferty, if it means that MasterCard Inc. and American Express Co. can further their cooperation with UnionPay at Visa's expense.
The move probably reflects the degree of frustration Visa has felt at watching UnionPay expand its international network and chip away at Visa's market share.
"This would not normally be cause for conflict," Lafferty wrote, "but since only [UnionPay] has access to China's lucrative domestic bank card sector, Visa has decided to flex its muscles on this issue."