Payment Cards in China

Introduction
Payment Cards in China is an invaluable guide to one of world's largest payment card markets. The report provides statistics on market size, competitor market shares and forecasts. It also provides an overview of regulation, competitor activities, issuer strategy and product innovation including developments in contactless, mobile payments, online and prepaid cards.

Features and benefits
Detailed market data, competitor shares and forecasts are an invaluable guide for any payments player building a business case for activity in China.
Analysis of the opportunities across different consumer segments allows for specific targeting of the most profitable customer groups.
In depth insight into contactless, mobile, prepaid and online payments highlight future revenue generation opportunities for all industry stakeholders
Highlights
China is the second biggest economy, comprising 1.3 billion people, or nearly 20% of the world's population. Thus, the overall size of the market, along with the technological resources available within the country, are some of the main factors contributing to the explosive growth of the Chinese economy over the last decade.

With over 200 million credit cards in circulation, credit card issuers in China need to understand the different customer segments that currently make up the market. Overall, two-thirds of credit card customers in China do not revolve a monthly balance. This signifies the importance of pricing strategies for the transactors segment.

Neglecting to adopt contactless technology as part of their strategies for the next few years may cost Chinese credit card issuers dearly. Datamonitor estimates that the addressable market opportunity is $29.2 billion, a significant portion of the Chinese card-based payment market.

Your key questions answered
Which card segments are showing the fastest growth in Chinese market and why?
Who are the key players in China and their market share?
How do consumers react to different card offers and what features may attract new customers?
Should financial institutions in China include a contactles strategy in their short to medium term strategy?

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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Sizing and forecasting the payment card market in China 2
Competitor and product developments in China 3
Online, Contactless, Prepaid and Mobile Payments 3
Sizing and Forecasting the Payment Card Market in China 11
Overview 11
Key macroeconomic and consumer data 12
Sizing the payment card market in China 18
Market structure and key issues 44
Forecasting the payment card market in China 45
Credit Card Customer Segmentations 49
Competitor and Product Developments in China 54
Overview 54
Profiles of the key players in China 54
Card issuer market shares and performance 57
Product design and issuer strategy in China 60
Card scheme market shares and developments 65
Online, Contactless, Prepaid and Mobile Payments 71
Overview 71
Local non-card payment services hold a large share of the online payment market in China 72
Mobile NFC payments are set to overtake contactless cards 78
Mobile payments could be used to target unbanked consumers 82
Banks should see prepaid cards as a platform to target niche consumer segments 84
Appendix 87
Supplementary data 87
Definitions 91
Methodology 93
Forecasting methodology 94
Further reading 95
Ask the analyst 96
Datamonitor consulting 96
Disclaimer 96


TABLE OF FIGURES
Figure 1: China is the second largest economy in Asia Pacific, as of 2009 13
Figure 2: Despite the recession, the Chinese economy grew by 8.0% in 2009 14
Figure 3: China’s economy was hit by deflation in 2009 15
Figure 4: China recorded a 4.4% rate of unemployment in 2009 16
Figure 5: China has the second lowest card penetration rate among Asia Pacific countries 18
Figure 6: The penetration rate of pay now cards in China is higher than that of pay later cards, 2008 19
Figure 7: Pay now card penetration in China grew at a CAGR of 25.1% over 2004–08 20
Figure 8: China recorded the highest pay later card penetration growth rate over 2004–08 21
Figure 9: Pay now cards account for the majority of payment cards in issue in China 22
Figure 10: Pay now cards accounted for the largest share of cards transactions over 2004–09e 23
Figure 11: Payment cards were used more at ATMs than at POS in China 24
Figure 12: Payment cards are primarily used to buy food and drink in China 25
Figure 13: Credit cards were used the most among all payment cards over 2004–09e in China 26
Figure 14: POS transactions are catching up with ATM transactions in China 27
Figure 15: Pay now cards accounted for the highest overall transaction value 28
Figure 16: The value of POS transactions increased substantially in China during 2004–09e 29
Figure 17: Clothing and footwear account for the greatest transaction value in China 30
Figure 18: Average transaction values were highest for charge and deferred debit cards in China 31
Figure 19: Average POS transaction values were higher than those seen at ATMs 32
Figure 20: Asia Pacific countries are closely matched in terms of frequency of use and transaction value of pay now cards at POS terminals 33
Figure 21: ATM transactions accounted for the highest turnover per pay now card in China 34
Figure 22: The average value and frequency of use of pay later cards at POS terminals vary significantly across all Asia Pacific countries 35
Figure 23: Average turnover per pay later card was higher at POS terminals than at ATMs in Asia Pacific 36
Figure 24: Flights and hotels account for the highest average pay later transaction value in Asia Pacific 37
Figure 25: 50% of all Chinese credit cards are seen as primary by consumers 38
Figure 26: 54% of cards in China are used all the time, the highest among all Asia Pacific countries 39
Figure 27: Revolve rates per outstanding balance range between 3–13% across Asia Pacific 40
Figure 28: 78% of consumers in China pay off their balance in full each month 41
Figure 29: ATM terminal numbers grew at a CAGR of 25.1% in China over 2004–08 42
Figure 30: POS terminals in China grew at a CAGR of 42.3% over 2004–08 43
Figure 31: The number of pay now cards in issue is expected to increase by 7.5% over 2010–14 45
Figure 32: The credit card market in China is expected to grow at a CAGR of 27.8% during 2010–14 46
Figure 33: The charge card market is expected to show an inconsistent trend over 2008–14f 48
Figure 34: The majority of credit card customers in China are transactors 50
Figure 35: Credit card customers tend to have a higher education level than those who do not have a credit card 51
Figure 36: Both credit card transactors and revolvers have similar income profiles 52
Figure 37: Revolvers are more likely to switch credit cards than transactors 53
Figure 38: ICBC was the largest issuer of credit cards in China, 2009 57
Figure 39: Agricultural Bank of China accounts for one-fifth of the pay now card market in China 58
Figure 40: Bank of China was the largest charge card issuer in China 59
Figure 41: Credit card issuers are targeting niche consumer segments 61
Figure 42: Co-branded cards dominate credit card offerings in China 62
Figure 43: A low annual fee is the number one factor for consumers looking for a new card 63
Figure 44: Revolvers and transactors have similar views in terms of selecting a credit card provider 64
Figure 45: CUP dominates the pay now card market in China 65
Figure 46: CUP accounted for the highest total transaction value among the pay now card schemes 66
Figure 47: JCB and American Express experienced substantial growth over 2004–08 67
Figure 48: The transaction value of all credit card schemes in China declined in 2009 68
Figure 49: Visa was the leading scheme in the Chinese charge card market in terms of cards in issuance 69
Figure 50: Visa was the dominant scheme in the Chinese charge card market in value terms 70
Figure 51: Credit card and Alipay are the most popular online payment methods in China 72
Figure 52: Online payments in China have grown substantially over 2009–10 73
Figure 53: Alipay dominates the online payments market in China 74
Figure 54: Online fraud in China is one of the highest among Asia Pacific countries 75
Figure 55: China is ranked second bottom in terms of online credit card spending 76
Figure 56: Chinese consumers are most comfortable with Alipay and credit cards for online payments 77
Figure 57: Contactless payments are a $29.2 billion opportunity 79
Figure 58: Petrol represents the biggest opportunity for contactless payments 2009 80
Figure 59: Consumers have reacted positively to contactless payments 81
Figure 60: Wing provides mobile payment solutions in Cambodia 83
Figure 61: Most consumers have used prepaid cards when on public transport 84
Figure 62: The use of prepaid cards in China is still relatively low compared to other countries 86


TABLE OF TABLES
Table 1: China – macroeconomic indicators 12
Table 2: China – demographics and consumer trends 17
Table 3: Datamonitor’s forecast for the pay now card market, 2008–14f 46
Table 4: Datamonitor’s forecast for the credit card market, 2008–14f 47
Table 5: Datamonitor’s forecast for the deferred debit and charge card market, 2008–14f 48
Table 6: The majority of credit card customers in China are transactors and repay their monthly statements in full each month 87
Table 7: Credit card customers tend to have a higher education level than those who do not have a credit card 87
Table 8: Both credit card transactors and revolvers have similar income profiles 88
Table 9: Revolvers are more likely to switch their credit cards than transactors 88
Table 10: For those who are looking for a new card, annual fee is the number one factor 89
Table 11: Revolvers and transactors have similar views toward selecting a credit card provider 89
Table 12: Online payments in China have grown substantially 2009–10 90
Table 13: How do you usually make payments for the goods or services you buy online? 90
Table 14: Thinking about financial fraud and crime, have you been a victim of any of the following in the last three years? 91
Table 15: What factors influenced your choice to use the online payment methods you outline above? 91
Table 16: Current relevant publications 95



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