Amex bullish on China credit card biz

American Express sees great potential in China's credit card market and is ready to further increase investment in the country as needed, said the head of the global financial services corporation's joint venture in China.

Yamin Zhu, CEO and general manager of Express (Hangzhou) Technology Service Co Ltd, American Express's majority-owned JV with Chinese fintech company Lianlian DigiTech Co Ltd, said American Express has a long-term commitment to the Chinese market and is willing to further inject capital into the JV if needed.

"Our shareholders are upbeat about the Chinese market and have confidence in our management team, and are willing to support the joint venture in the long run," she said.

In 2020, Express (Hangzhou) received approval from the People's Bank of China, the country's central bank, for a network clearing license. This made American Express the first foreign payments network eligible to clear renminbi transactions in the Chinese mainland, meaning that it can authorize banks to issue and accept American Express renminbi bank cards in the country.

American Express has increased capital in the JV three times since then. In December, the venture's registered capital rose from 5.06 billion yuan ($696.8 million) to 5.76 billion yuan, data from the PBOC showed.

While recognizing that China's credit card market is now undergoing consolidation, Zhu said the market still boasts huge growth potential as the average number of credit cards held per person is about 0.5 in China, compared with approximately 3 to 4 in the United States and South Korea.

A report from the PBOC said that the number of credit cards as well as dual-function cards — which are combined debit and credit cards — in China stood at 767 million as of the end of 2023, marking a year-on-year decrease of 3.89 percent.

Despite the shrinking number of credit cards in circulation, Zhu said the JV has seen its revenue register continuous improvement over the past two years, although it has yet to turn a profit when accounting for initial investments.

"High-net-worth individuals' consumption behavior is actually hardly impacted by ups and downs in economic cycles," Zhu said, adding that the JV has a strategic focus on the premium credit market, cross-border payments and local merchant coverage.

While continuing to collaborate with banks to launch more credit cards, the venture will also provide value-added services to its bank clients, including issuing reports and offering training on accurately identifying the needs of high-end credit card holders.

American Express is not the only international credit card network that is eyeing the growth potential of the Chinese market as the country deepens financial opening-up. In November, Mastercard's JV also received a clearing license from the PBOC.

China's financial opening-up also benefited American Express in that the country's efforts to improve payment services for foreign visitors will help boost transaction volume made via foreign credit cards, Zhu said.

Zhu said American Express has cut its commission fees charged in China to a level comparable to domestic credit cards of less than 1 percent since 2020 to reduce the cost of accepting foreign cards and boost merchants' willingness to accept them.