The biggest share price gains for both Visa and MasterCard over the past year have come in response to Chinese government policies that open the local payment card market to foreign players.
In late October, China’s cabinet announced it would allow foreign companies to access the market. The government followed up in April with rules that take effect on June 1.
Previously, all renminbi payments had to be cleared through China UnionPay, a network created by the central bank and now owned by 85 mostly state-owned banks. But in 2012 the World Trade Organization ruled that China unfairly discriminated against foreign payment processors, handing a victory to the US, which brought the complaint.
Industry experts say foreign players still face big challenges in trying to win market share from UnionPay, the settlement network used by 80 per cent of debit cards accounting for 72 per cent of total transaction value in 2014, according to Datamonitor.
"Visa and MasterCard need to build up their local infrastructure. In the past they just operated as a sales office. They don’t really have the physical presence,” said James Chen, former China general manager for MasterCard and now greater China general manager at First Data Corp.
"They need to start to recruit people and buy equipment — basically build from ground zero.”
Chinese banks do issue Visa, MasterCard and American Express credit cards — whose payments are processed through their foreign-currency networks — but few Chinese merchants accept them. Instead, Chinese cardholders use them mainly for foreign travel.