Amex, Citibank Vie To Be First U.S. Card Providers In China

American Express and Citibank are mobilizing to become the first U.S.-based card providers to offer dual currency commercial cards in China. The country this year opened itself up to foreign card issuers, and the two U.S. card providers already are in the midst of launching consumer cards there. The U.S. card issuers said they soon would be courting multinational businesses and China-based companies.

As Citibank touts global capabilities that it said surpass any other U.S.-based bankcard issuer and match only American Express, the bank—along with U.K.-based HSBC—in January announced that China gave them permission to issue credit cards in the country. While the announcement made Citibank and HSBC the first foreign bankcard issuers to gain such approval, American Express on March 30 joined the race through an agreement with Industrial and Commercial Bank of China, which joined Amex's global network and plans to issue American Express consumer cards.

"China's a hot country that keeps on coming up. We're not sure of the volume that is there today," said Gary Schneider, global business manager for Citibank commercial cards. "We do believe it will be a large travel market and also a huge purchasing card market because of all the manufacturing that is happening there."

Through a partnership with Shanghai Pudong Development Bank, Citibank this year launched a consumer card in China, and although Citibank could not commit to a corporate launch in the country by year-end, Schneider said he hopes it will be the first U.S.-based bank to issue commercial cards there. Meanwhile, Citibank said by July it will be live in five countries in Asia by issuing cards and reporting on data through its own proprietary system. "Singapore and Malaysia are live now," Schneider said. "Japan, Hong Kong and Australia will come on in July."

Amex and ICBC are gearing to launch the first American Express-branded payment cards in the country, which will be in both Chinese and U.S. currency. Amex described the move as the "the broadest card alliance yet between a Chinese bank and a global financial services company."

"In China, the payment industry is in its infancy, so we've made sure we're entering this market with an exceptional partner," said Amex CEO Ken Chenault. "ICBC is the largest bank in China. With 24,000 branch locations, it has an exceptional distribution reach. The deal we've struck with them is a strong one, providing us access to the major cities in China at a minimal capital commitment." Yet, Amex said it still may be several years before it and its partner issue dual currency corporate cards in China.

China's booming economy and surge in business travel are making the country a covetable spot for card providers. American Express's Mark Webb noted the "explosion in international travel in China," which he expects to continue. "China's economy is growing faster than anywhere else that I'm aware of," Webb added.

While figures on business travel in China were not provided, Chinese vice minister of commerce Yu Guangzhou last month told China-based Xinhua News Agency that economic growth in China has fostered strong growth in business travel within the country.

Figures show China has maintained an average annual economic growth rate of 9.4 percent during the past 25 years. China's Ministry of Commerce this month predicted the economy in the second quarter of this year would keep pace with the first, with GDP growth for the first half of the year topping 9 percent. Meanwhile, China's president is expecting the growth to continue through 2020. "We will quadruple the 2000 GDP to US$4 trillion, with a per capita GDP of US$3,000, and further develop the economy, improve democracy, advance science and education, enrich culture, foster greater social harmony and upgrade the texture of life for the people," Chinese President Hu Jintao said in April at the Boao Forum for Asia, an organization that promotes economic cooperation in Asia.

Yet, unlike many countries in the West, China has yet to build a robust merchant infrastructure necessary to make credit cards widespread as only a nominal percentage of China-based merchants accept cards. However, many establishments, such as hotels and shops in large cities, have already set up credit card acceptance terminals that cater to foreign travelers.

"There's a lot of work to do on the purchasing card side because I don't believe that a lot of those merchants accept credit cards," Schneider said. "I'm confident that the travel merchants do, because there's a lot of U.S. and non-Chinese citizens coming to the country for business and using credit cards to pay. I think there's a lot of infrastructure there on the travel side. We'll have some work to do on the purchasing side."