Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA), the world’s biggest payments networks, gained the most since October after China indicated that it intends to end card monopoly. MasterCard gained 3.9% to close at $91.20 in New York. Visa advanced 4.1% to $68.01, the top gainer in the Dow Jones Industrial Average. The rules released by China’s State Council pave the way for the two companies to gain a strong foothold in that nation. It is the clearest view on the plans to open-up the Chinese market to U.S. firms. The rules will be effective from June 1, 2015.
As of now, there is only one payment network firm that control the entire Chinese market. By easing the regulations, even a small increase in volume is going to be significant. Analyzing the present conditions, it would be impossible to instantly place the revenue opportunity but anything above zero is a progress. In China, ‘China UnionPay Co.’ is the sole clearing service provider company for yuan-based bank-card payments.
The WTO told China back in 2012 to put an end to discriminations against foreign payment companies. China reported 4.9 million bank cards at the end of last year. The easing of rules offers significant growth opportunities to MasterCard and Visa Inc (NYSE:V). In fact they could double their purchase volumes by 2023.
As per the Nilson report, out of every $100 global purchase volume in 2014, UnionPay cards accounted for $38. It recorded the highest percentage growth in terms of transaction among all networks in 2014. The growth surged to 52.3% from 2014. China presents lucrative opportunity for the U.S. companies. However, it is not clear how soon the companies can benefit. There is a need to analyze the rules in the detail as it is one thing to define rules, and having them same in all the regions. Visa stated that the company will review the new regulations. It will look forward to further details of the rules.