21st Century Business Herald reporter Tang Jing reported from Beijing
The reduction in the rate of foreign card swipe is finally coming as scheduled.
Recently, there have been market rumors that international card associations may reduce the handling fee rate for foreign cards in China, and the current rate is 2%-3%. In this regard, the 21st Century Business Herald reporter learned from various sources that Visa and Mastercard, the two major international card associations, have worked with domestic acquirers to reduce the handling fees for merchants to accept foreign cards, and the relevant fee reduction measures have been basically implemented on June 15. As for the specific range of fee reductions, a person familiar with the matter told reporters that there are differences between different card associations, and the fee reduction standards and landing points of different industries are also different.
The reduction of the foreign card swipe rate is of great significance to improve the convenience of payment for foreign visitors to China. For a long time, the high handling fee of foreign cards has been one of the important factors restricting merchants' willingness to accept overseas bank cards, and it is also a key "blockage" that affects the payment experience of foreign visitors to China. Prior to this, the handling fee for merchants to accept foreign cards was generally about 2.5%-3%, while the handling fee for domestic cards was generally about 0.6%, and the mobile payment fee was lower, resulting in a lack of enthusiasm for merchants to accept foreign cards.
It is worth noting that the Payment and Clearing Association of China has also recently issued an initiative, calling on international card associations to facilitate the consumption and payment of foreign personnel in China, transfer all preferential rates to merchants, and effectively reduce the cost of foreign card acceptance. The initiative also proposes that acquirers and their outsourcing service providers shall not withhold foreign card fee discounts or even increase the rate in disguised form by means of overt and covert increases, passing on costs, etc. In the eyes of the industry, this initiative also sends a signal that international card associations will reduce the domestic credit rate of overseas bank cards.
"Appropriately reducing the cost of the rate is conducive to the further opening of the Chinese market by international card associations, after all, real money investment can cultivate user loyalty. Judging from the popularity and usage rate of foreign countries, it is also easier for international card organizations to be a bridge and link to connect foreigners to China. Wang Pengbo, chief analyst of the financial industry at Broadcom Consulting, believes that reducing the foreign card rate is a rational business choice for international card associations.
In response to the reduction of foreign card swiping rates, Dong Zheng, a senior credit card expert, is not surprised. He told reporters that merchants have the right to choose whether to accept and which international card associations to accept based on their own circumstances, and Visa, MasterCard, etc. will also take into account the importance of the Chinese market, and appropriately adjust the overseas card rate based on their own cost affordability, and the market is gradually moving towards pricing balance in this two-way choice.
Boost merchants' enthusiasm for accepting foreign cards
In the past, the high card swiping rate led to the reluctance of merchants to install foreign card POS machines, and some small retailers with low customer unit prices were particularly unmotivated, which affected the payment experience of foreign visitors to China. The reduction in the foreign card rate will further increase the enthusiasm of merchants to accept foreign cards.
Since the General Office of the State Council issued the "Opinions on Further Optimizing Payment Services and Improving the Convenience of Payment Services" in March this year, the People's Bank of China has taken the lead in promoting the optimization of payment services in various places, one of the important contents of which is to optimize the foreign card acceptance environment. According to the data disclosed by the central bank, in May 2024, major bank card organizations made 1.657 million offline foreign card POS transactions, amounting to 2.97 billion yuan, basically doubling from February.
Wang Jing, the person in charge of the Beijing culture and art workshop "Qiankun Space", told reporters that there are many foreign tourists who come to the store to consume, and the store provides them with POS machines to support overseas credit card payment. She admits that on the premise of being able to make a successful transaction, merchants do weigh the cost of rates under various payment methods. Wang Jing's statement is basically consistent with what the reporter learned from the industry, that is, in the case of high fees for foreign card swiping, merchants are more inclined to guide foreign tourists to use cash or Alipay, WeChat and other methods with lower rates. This phenomenon is expected to ease with the orderly implementation of the reduction in the swipe rate of wild cards.
In addition, according to a questionnaire survey conducted by the Payment and Clearing Association of China on the intention of merchants in Beijing and other eight places to accept foreign cards, most of the special merchants believe that reducing the foreign card acceptance rate will help improve the service capacity of foreign card acceptance. According to the questionnaire, some special merchants are willing to open the foreign card acceptance function, and proposed that the acceptable foreign card acceptance fee range is 0.60% to 1.50%.
In fact, getting international card associations to lower their card rates is not only the expectation of Chinese merchants, but also a global hot topic. In foreign countries, Visa and MasterCard have repeatedly clashed with merchants because of high fees, and even reached the point of going to court. Some people in the payment industry pointed out that reducing card rates has become a global trend, and international card associations should also keep pace with the times and take advantage of the trend.
The reporter noted that as early as November 2022, the American online retail giant Amazon once announced that consumers would not be allowed to pay with Visa credit cards issued in the United Kingdom because the transaction fees were too high. Amazon even promised a £20 subsidy to affected customers, encouraging them to switch to other credit cards. However, the move was seen as a negotiation strategy for Amazon and Visa to "go head-to-head", and the dispute ended with a settlement between the two parties.
In Chinese mainland, up to now, the work related to the reduction of card rates by international card associations is progressing steadily. The reporter learned from the Payment and Clearing Association of China that on June 15, Visa and MasterCard have completed the transformation of the fee reduction work system in Chinese mainland, and actively cooperate with acquiring banks and acquirers to carry out system transformation.
A number of people in the payment industry told reporters that domestic acquirers have lowered the handling fees for offline card transactions of merchants except for some specific industries according to the fee reduction notices issued by Visa and Mastercard. The acquirer has basically completed the fee reduction work at the end of June, including the transformation of the merchant rate system, the notification of the merchant, the replacement of the agreement, etc., and will make good use of this fee policy dividend in the future, further strengthen the construction of the foreign card acquiring scenario, and effectively serve the payment convenience of overseas people coming to China.
The relevant person in charge of the Bank of Communications told reporters that the Bank of Communications has implemented the price adjustment of the acceptance fee of the outdoor card of the designated industry on June 15, transferred all the preferential rates lowered by the international card association to the merchants, and effectively did a good job in the communication of the merchants, and the price adjustment work was stable and smooth. As of the end of May, Bank of Communications had achieved full coverage of key merchants in 17 key cities, with a net increase of 221% in the number of merchants accepting foreign cards compared with the end of February, and a year-on-year increase of 132% in transaction volume in the past three months.
Bridging the payment divide at home and abroad
According to data from the central bank, the mobile payment penetration rate in mainland China was as high as 86% at the end of 2023, making it the country with the highest mobile payment penetration rate in the world. However, overseas payment habits are still dominated by credit cards, and cash is widely used. Some say it's as if there is a reverse "digital divide" between China and abroad. This gap is gradually being bridged as payment facilitation moves forward.
The reporter recently visited the country's first "inbound consumption-friendly business district" Beijing Blue Harbor and found that most of the merchants here have conspicuous English prompts in front of the cash counter of "you can use your home wallet to scan the code to pay", and many merchants also accept Visa cards, not only can provide English menus, some waiters can also communicate in English.
The relevant person in charge of Visa told reporters that it will work with acquirers to help merchants quickly carry out foreign card acquiring business by reducing card transaction fees, taking incentives to open more merchants to accept foreign cards, and introducing new acceptance tools.
For example, foreign visitors to China can swipe and tap their cards at merchants that support foreign card acquiring and have the Visa logo, as well as withdraw cash at Visa-enabled ATMs. Foreign visitors to China can scan the QR code to pay at more merchants by binding a Visa card to WeChat Pay, Alipay and other e-wallets. At the same time, Visa also supports cardholders to use foreign cards to pay in mobile apps such as Ctrip, Meituan, and 12306.
According to him, in the next step, Visa will continue to increase resource investment and work with partners to promote two major measures to further improve the domestic acquiring environment: first, cooperate with acquirers to optimize the current POS machine acquiring business process and improve the payment experience of cashiers and consumers; The second is to actively respond to the cost adjustment policy and cooperate with acquirers to reduce the acceptance cost of small and medium-sized commercial outdoor cards.
The relevant person in charge of Mastercard said that it plans to add millions of new Mastercard foreign card merchants within three years, focusing on major foreign-related places such as hotels, buses, and scenic spots in hub cities and popular tourist destinations. At the same time, we will enrich the acceptance methods of foreign cards, respect the payment habits of overseas visitors to China, and promote contactless "card tapping" transactions in line with international standards. In addition, in collaboration with acquiring bank partners, we have strengthened the standardized posting of ATM foreign card acceptance signs and the maintenance and updating of machinery and facilities in key business districts, so as to facilitate the clear identification, smooth cash withdrawal, and free consumption of overseas visitors to China.
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