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The big American card networks have dominated payments since the arrival of the credit card. Visa, MasterCard, American Express and others have had it relatively easy as the share of global cards has been concentrated in North America and Europe.

But could this be about to change as economic growth and demographic upheaval in Asia tilts the balance east?

Asian growth

Over the last few years we’ve seen significant growth in Asia as the region’s economies expand and populations turn away from being purely cash-based.

The latest World Payments Report from Capgemini and RBS showed Asia is the number one driver of global non-cash transactions. In particular, China’s non-cash payment growth of 37.7 percent in 2013 was spectacular.

And now the latest data from RBR shows the value of card payments in Asia-Pacific grew by 25 percent in 2014 to reach $9 trillion.

According to the report, “Global Payment Cards Data and Forecasts to 2020”, that equates to slightly less than half of all card spend in the world.

But this is barely the beginning. RBR reckons card spending in the region will reach $20 trillion by 2020. Growth is uneven, naturally. On the one hand there are mature markets like Japan and South Korea; on the other brand new frontiers like Myanmar and Vietnam.

The Nilson Report says Asia Pacific will account for 35 percent of all general purpose card payments by volume by the year 2024, exceeding the US, which will have 32 percent share.

While the volume of payments made in the US are predicted to double between 2014 and 2024 (88 billion to 163 billion), those in Asia Pacific are predicted to quadruple from 47 billion to 182 billion.

Such stellar growth is good news for all card networks, but the pre-eminence of one Asia-focused scheme makes for an interesting balance-of-power battle.

Unstoppable UnionPay

At the heart of this growth is UnionPay, which is by far the largest card scheme in Asia. According to RBR, its share of the market grew again in 2014 to 70 percent, while the next biggest player, Visa, has just a 15 percent share.

In fact, because of the vast Asian market that it dominates, UnionPay is the biggest card network globally, having overtaken Visa some time ago. It accounts for around 40 percent of all payment cards in circulation, versus one-quarter for Visa.

However, a previous RBR report, “Global Payment Cards Data and Forecasts 2013–2019”, found that while there are lots of cards in Asia Pacific, the region doesn’t account for its fair share of payments. People in the region own more than half of the world’s cards but account for just 21 percent of card payments.

That’s clearly going to change, as the Nilson Report and updated RBR data indicate. UnionPay can probably expect consumers to use their cards a lot more in the coming years.

Visa and MasterCard enter the fray

But there are challenges for UnionPay in the years ahead, not least its lack of global reach. Something like 99 percent of its cards are issued in China. It is spreading its wings but tapping into the global market, particularly the US and Europe, will not be easy.

Meanwhile, UnionPay faces a war on two fronts as Chinese authorities have opened up bank clearing to the big US networks. No longer a closed market, the vast potential of China is too tempting for the likes of Visa and MasterCard. Having said that, it’s not easy for the new players in China and Visa has decided to work with UnionPay to deliver services in the countries.

UnionPay may sit astride the Asian card sector like a colossus, but it’s got a fight on its hands to maintain market share. Likewise, Visa and MasterCard may dominate more mature markets, but with Asia’s card market booming, they can no longer rest on the laurels of their historic global pre-eminence.

 

Mervin Amos serves as Solutions Manager at NCR Corporation.  Mervin has a long history of working in the card payments industry, having worked for many years at AST on the UM20 product, then at S2 Systems in Dallas, then joining Alaric, an NCR business, as the architect for the Authentic product. 

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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp