Visa vs Union Pay: win China or win the world

We live on credit cards. Or debit cards. We hold one or more those plastic keys to deal with our daily transactions. Going overseas? No problem. The multinational credit card organisations can settle all the currency issues for you, with only 1% - 2% currency conversion fees of course. The logos on the right bottom of your card gurantee everything, no matter it's Visa or MaterCard. Easy. Quick. Safe.

While I was talking about how the major international credit organastaions deal with foreign exchange, there is a domestic credic card organisation in China called UnionPay, or 银联 in Chinese. This generous organisation does not charge a cent for foreign exchange commission. Isn't that sweet? However this organisation only issues cards in China and a limited number of international banks. This is a strategy of its global expansion, especially most of the transcation systems around the world is controlled by Visa and MasterCard. (Yeah they don't even accept American Express and JCB!)

Domestic credit card transcation with China is a different story. Foreign card organisations are not permitted to issue credit cards in China by themselves. They have to affiliate with UnionPay, which is the only legal transcation system in China. Therefore, most credit cards issued in China, if not issued by UnionPay alone, are co-branded card with two logos on.

The only exemption is the 2008 Olympics credit cards issued by Bank of China, which had only the logo of Visa on them. It was because UnionPay was not spousor of International Olympics Committee, whose logo then is not permitted to be printed on commercial products with the five circles.

(Images from the website of Bank of China. Copyright remains to BOC and other parties)
So both Visa and MasterCard, (Yes I did try to include JCB and American Express) issued a lot of those kinds of credit cards in China. Holders need to pay through UnionPay system if it is a domestic transaction in China. They could choose whether to use UnionPay or the other system when they were making an international payment.

Not anymore.

June 2010, Visa International regulated the international transcation for Chinese co-branded cards. It told the banks and merchants to use the Visa system (VisaNet) rather than UnionPay system in the transaction. Failure to do so will result a fine of $50,000 for the first violation and $25,000/ month for further violations.

The spokesperson of Visa China denied their attempt of banning UnionPay international transaction. They say every card starting with 4 is the property of Visa Inc. and they are not banning the usage of credit cards starting with 62, which are solo-branded cards from UnionPay. 'We are concerned about the safety of our customers.' They said.

Observers pointed out that the aim of Visa is to seek for a more open Chinese card market. Therefore they are threatening UnionPay and Chinese authority behind it. MasterCard and JCB will not follow on.