(TMTPOST)—In recent years, a concern over the payment difficulties faced by foreign visitors either for tourism or business has been mounting.
This issue came under the spotlight during a recent State Council policy briefing, where Zhang Qingsong, Deputy Governor of the People’s Bank of China discussed the payment challenges encountered by foreigners in China.
The central bank has given instructions on how to tackle this issue. First, require payment platforms like Alipay and WeChat Pay to streamline their processes to enhance the efficiency of card linking; second, simplify procedures for identity verification to facilitate the card linking process for foreign visitors while ensuring the security of personal information; third, urge major payment platforms to raise the single transaction limit for foreign visitors using mobile payments from $1,000 to $5,000 and the annual cumulative transaction limit from $10,000 to $50,000.
These initiatives follow the inclusion of “Improving Payment Services for Overseas Visitors” as one of the top ten annual priorities of the People’s Bank of China. “Foreigners Struggle to Spend Money in China” has even become a trending topic on Chinese social media platforms.Nagpur Stock
“In recent years, I have only used mobile payment methods. I can’t even remember the last time I paid with cash or a bank card in China.” Stuart Wiggin, a video blogger from Britain who has been living and working in Beijing for 16 years, told the People’s Daily.
Amidst the favorable policy environment, TMTPost recently conducted extensive discussions with various stakeholders, including card issuers, acquirers, card issuer organizations, and merchants. While the gap between domestic and international payments is gradually narrowing, there are still significant hurdles within this industry.
For many years, there has been a notable difference in payment habits between the Chinese and foreigners. While Chinese nationals prefer scanning QR codes for payments, foreigners are more accustomed to card-based payments. Despite the rapid digitalization of payment industries in Western countries over the past few years, this disparity persists.
Data from international card giant Mastercard indicates that in over 200 countries and markets where Mastercard operates, the majority have completed the migration to contactless payments during the pandemic. Over 60% of Mastercard transactions globally are now contactless, with regions like Singapore, Hong Kong, Macau, Malaysia, and Thailand seeing over 90% of the cards support contactless payments.
Meanwhile, the digitalization of payments in Chinese mainland still revolves around QR payments, with limited support for card-based payments. According to a 2023 Mastercard survey on foreign card acceptance in key retail and catering establishments in Beijing, Shanghai, Guangzhou, and Shenzhen, less than 40% of these merchants accept foreign cards, and less than 30% support contactless payments.
In a survey conducted by the Shanghai Municipal Government Advisory Office in 2023 to improve payment convenience for inbound visitors, results showed that foreign tourists preferred card and cash payments. However, out of 401 surveyed merchants, only 183 had installed foreign card POS terminals, accounting for 45.39% of the total.
The most glaring issue is the high transaction fees associated with foreign card payments. Historically, the transaction fees for foreign card payments have been significantly higher than those for domestic transactions. The single transaction fee for foreign card payments typically ranges from 2.6% to 3.2%, while domestic transaction fees are regulated by the National Development and Reform Commission and generally range from 1‰ to 2‰Jaipur Stock. Third-party payment platforms like WeChat Pay and Alipay usually charge merchants a fee ranging from 3.8‰ to 6‰, significantly lower than foreign card fees.
These fees are borne by merchants, making them reluctant to install foreign card POS terminals. Additionally, foreign card transactions at merchants may experience longer settlement times and require specific POS terminals, leading to higher fraud and chargeback risks compared to domestic transactions.
Moreover, integrating foreign cards into popular Chinese payment platforms like Alipay and WeChat Pay has been challenging due to the long funding chain and high privacy requirements.Indore Stock
Recognizing the need to bridge the gap in card acceptance, Chinese authorities are taking measures to improve payment convenience for foreign visitorsBangalore Investment. The recent announcement by China UnionPay to allocate three billion yuan for improving offline card acceptance terminals, signage, and promotional activities underscores the commitment to transforming the offline card payment environment.
However, beyond subsidizing rates and adjusting transaction limits, there are other critical factors to consider in making China more hospitable to foreign spending. The cost of upgrading payment terminals and adapting to different card standards poses a significant challenge, with banks likely to bear the brunt of these expenses.
In the long run, the goal is to establish a sustainable fee structure that ensures fair compensation for all parties involved. For now, initiatives like subsidizing transaction fees and expanding card acceptance networks serve as crucial steps towards enhancing payment convenience for foreign visitors in China.
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