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Visa has broken down a huge barrier that should give it a foothold in China.
The financial services giant has signed a memorandum of understanding (MoU) with state-run Chinese card company UnionPay, the only such company in the world’s most populous nation. The two companies signed the MoU with the intention of collaborating and fostering a healthy relationship in the future, according to Reuters.
Visa and UnionPay plan to work together on payments security, financial inclusion, and technological innovation, though they did not offer specific details on the terms of their partnership.
Visa has made this move in advance of China’s impending opening of its card processing network to foreign entities such as Visa and MasterCard. All card payments in China until October 2015 had to be cleared through UnionPay, but the World Trade Organization (WTO) ruled that China must open its market to foreign companies.
China’s central bank created UnionPay, which is owned by 85 member banks all affiliated with the state.
Jaime Toplin, a research associate at BI Intelligence, Business Insider’s premium research service, notes that this partnership could have far-reaching implications for both card networks.
Visa and Union Pay are two of the largest card networks in the world. Visa had issued 2.5 billion cards around the world except for Europe as of the end of the third quarter 2015, while UnionPay has more than 5 billion branded cards.
UnionPay could also give Visa ideas on innovating its digital payments, as China has a robust digital payments ecosystem. For example, Singles’ Day in November featured $14.3 billion in goods purchased in 24 hours. And Chinese shoppers already routinely use mobile wallets and in-app payments, two trends that have only recently started to truly gain momentum in the U.S.
On the flip side, Visa’s digital offerings and security products could give UnionPay the tools it needs to compete with Alipay and Tenpay.
This partnership is a major development in the world of payments, which is growing and changing all the time. And analysts have predicted that 2016 will be a crucial year for the payments ecosystem. But what does the future hold?
Evan Bakker and John Heggestuen, analysts at BI Intelligence, have compiled a detailed report on the payments ecosystem that drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.
Here are some key takeaways from the report:
- 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
- Payments is an extremely complex industry. To understand the next big digital opportunity lies, it’s critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play.
- Alternative technologies could disrupt the processing ecosystem. Devices ranging from refrigerators to smartwatches now feature payment capabilities, which will spur changes in consumer payment behaviors. Likewise, blockchain technology, the protocol that underlies Bitcoin, could one day change how consumer card payments are verified.
In full, the report:
- Uncovers the key themes and trends affecting the payments industry in 2016 and beyond.
- Gives a detailed description of the stakeholders involved in a payment transaction, along with hardware and software providers.
- Offers diagrams and infographics explaining how card transactions are processed and which players are involved in each step.
- Provides charts on our latest forecasts, key company growth, survey results, and more.
- Analyzes the alternative technologies, including blockchain, which could further disrupt the ecosystem.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of e-commerce demographics.