2010-06-03 20:32

BEIJING - Visa said on Thursday it will stop banks using China Unionpay's system to settle international transactions with bank cards bearing the Visa and Unionpay logos.

Media reports said member institutions could face hefty fines from Visa if they disobeyed the rules.

But China Unionpay told Xinhua on Wednesday that no party has the right to restrict the payment channels that bank card holders choose to use.

According to Visa's rules, people using the Visa-Unionpay card outside of the Chinese mainland will face a one to two percent currency transfer fee on each purchase.

Sources with Visa's Beijing Office told Xinhua Thursday that the rule was not new, and Visa would just enforce it.

As the sole bank card processor in China, China Unionpay's overseas presence has grown significantly during its seven-year history. It is currently accepted in more than 90 countries and regions.

According to a report released by the People's Bank of China, or the central bank, Chinese banks had issued 175 million credit cards at the end of the third quarter of 2009, of which 33 percent are accepted by the Visa system.

Chinese travellers spent $42 billion abroad last year, according to the Chinese Tourism Academy of the National Tourism Administration.

Guo Tianyong, professor with the Central University of Finance and Economics, said the dispute is merely a reflection of the fierce competition between the two bank card processors in both the overseas and China's domestic markets.

His view was echoed by Zhong Wei, an economist with the Beijing Normal University, who said Visa covered up its real reason, "Actually Visa's actions aim at increasing its shares in the Asia-Pacific market and defending its dominance in the global market."

"The dispute is unavoidable," said Guo, noting that Visa is very unhappy with China Unionpay's monopoly status in China, therefore blocking its overseas channels may be a good "hit-back."

Guo suggested that China open its bank card market letting more competitors into the domestic market, which would help develop the country's fast growing bank card industry.