AmEx JV gains historic approval to clear RMB transactions

American Express announced on Saturday its joint venture in China, Express (Hangzhou) Technology Services Company Limited, has received approval from the People's Bank of China, the country's central bank, for a network clearing license.

With the license, American Express becomes the first foreign payments network to be licensed to clear renminbi transactions in China.

Express Company, a joint venture of American Express and the Chinese fintech services company Lianlian DigiTech Co Ltd, expects to begin processing transactions later this year. It has built a network to clear domestic transactions charged on American Express branded cards, and the network is also compatible with the key mobile wallet players in China.

"We are pleased to be the first foreign company to receive this license. This approval represents an important step forward in our long-term growth strategy and is an historic moment, not only for American Express but for the continued growth and development of the payments industry in the Chinese mainland," said Stephen J. Squeri, chairman and chief executive officer of American Express. "We look forward to welcoming millions of new consumers, businesses and merchants in China to American Express, as well as continuing to enhance our support for our global customers when they travel to the region."

Zhengyu Zhang, chairman of LianLian DigiTech, said: "Against the backdrop of globalization and China's opening-up of its financial industry, we have been actively introducing China's mobile payments to the world while striving to learn from and connect with world-class financial companies."

The current focus of Express Company is to continue the preparation work for a successful business launch by working closely with the regulators and partners, said Walter Liu, CEO of the company.

China has accelerated the opening of the domestic financial markets and deepened supply-side structural reform in the financial sector. The PBOC announced on Feb 11 it has approved Mastercard NUCC Information Technology (Beijing) Co Ltd, a joint venture of Mastercard and NetsUnion Clearing Corporation, a Chinese clearing house for online payments, giving Mastercard access to China's massive payments market.

Last year, the volume of non-cash payments in China totaled 3,779.49 trillion yuan ($534 trillion), of which the volume of transactions via bank cards was 886.39 trillion yuan, according to the central bank.

"We are delighted and encouraged by this latest decision from the PBOC," said Mastercard President and CEO Ajay Banga in February. "China is a vital market for us and we have reiterated our unwavering commitment to helping drive a safer, more inclusive and seamless payment ecosystem for Chinese consumers and businesses. We remain focused on working with the Chinese government and local partners to grow the overall payments infrastructure."

Compared with its major competitor Mastercard, Visa Inc made a different choice regarding its push into China. Alfred F. Kelly Jr, chairman and chief executive officer of Visa, said last year the leading global payments technology company has applied for a bank card clearing license in China as a wholly owned foreign enterprise.

Visa expanded its Beijing office to a new building and opened its China Innovation Center in the capital city on March 22, 2019, in an effort to encourage clients and partners — including banks, merchants and fintech companies — to develop solutions for customer pain points.

"These are signs of our willingness to invest ahead of having a domestic license approved, because we are both confident and hopeful that can happen," Kelly said.

"I believe that the Chinese government is embracing the idea of opening their markets because they want to see more participation. More participation leads to more innovation. More innovation leads to more choices for consumers and small business owners," he said.