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AmEx Wins PBOC Approval to Operate in China Via Joint Venture
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American Express Company (AXP - Free Report) has received an approval for a clearing and settlement license in mainland China from the People’s Bank of China (PBOC), which is responsible for carrying out monetary policy and the regulation of financial institutions in the country.
This regulatory nod paves the way for the company to build a network business for processing domestic as well as RMB transactions through its joint venture in the Chinese mainland.
In order to conduct business activities in the dragon land, American Express formed a joint venture with LianLian aka Express (Hangzhou) Technology Services Company (Express Company). Via this set-up, the company will form an ecosystem to enable easy clearance and domestic settlement of the charges on its branded cards.
The receipt of this approval is a positive for American Express as the company will now be able to gain access to the $27-trillion worth payments market, which was dominated by homegrown giants Alibaba Group Holding Limited’s (BABA - Free Report) Alipay and Tencent Holdings Limited’s (TCEHY - Free Report) WeChat Pay. According to the central bank of China, the nation’s payment firms processed 169 trillion yuan ($27 trillion) of transactions in 2018, reflecting a nine-fold surge from the 2013-level.
Until recently, foreign companies remained restricted in the Chinese payments markets. However, the Chinese government is gradually opening up its financial system, which was one of the key requisites as part of the “phase one” Sino-US trade deal.
Foreign companies have been lobbying to enter the onshore financial services market valued at $45 trillion but China has been very careful in allowing the foray of overseas companies in its region, assessing he impact of such a move on its job market, competition to be faced by its homegrown companies and the movement of capital across its borders.
Nonetheless, there should be close contest in the Chinese payments market as more than 260 firms received payment licenses. This should increase rivalry between companies, which via innovative products and services will try and grab market share. However, payments companies abroad that are willing to do business in China are mandated to keep data locally, set up local units and establish payment infrastructure.
In February 2020, another company in the payment processing space, Mastercard Inc. (MA - Free Report) , too got an approval from the PBOC to set up Chinese joint venture for executing bank card clearing business operations in the country.
However, it is difficult for foreign entities to gain a pie of the local Chinese payments market, yet they stand a chance to compete in the cross-border payment market. Per a Frost & Sullivan research report, the mobile payment market is expected to grow 21.8% in 2023 from the 2017-level, attributed to the flourishing e-commerce platforms. In fact, going by the aforementioned report, active mobile payment customers’ number will shoot up to 956 million in 2023 from 562 million in 2017.
In three months’ time, the stock has rallied 18.4% compared with its industry’s growth of 30.7%.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
AmEx Wins PBOC Approval to Operate in China Via Joint Venture
American Express Company (AXP - Free Report) has received an approval for a clearing and settlement license in mainland China from the People’s Bank of China (PBOC), which is responsible for carrying out monetary policy and the regulation of financial institutions in the country.
This regulatory nod paves the way for the company to build a network business for processing domestic as well as RMB transactions through its joint venture in the Chinese mainland.
In order to conduct business activities in the dragon land, American Express formed a joint venture with LianLian aka Express (Hangzhou) Technology Services Company (Express Company). Via this set-up, the company will form an ecosystem to enable easy clearance and domestic settlement of the charges on its branded cards.
The receipt of this approval is a positive for American Express as the company will now be able to gain access to the $27-trillion worth payments market, which was dominated by homegrown giants Alibaba Group Holding Limited’s (BABA - Free Report) Alipay and Tencent Holdings Limited’s (TCEHY - Free Report) WeChat Pay. According to the central bank of China, the nation’s payment firms processed 169 trillion yuan ($27 trillion) of transactions in 2018, reflecting a nine-fold surge from the 2013-level.
Until recently, foreign companies remained restricted in the Chinese payments markets. However, the Chinese government is gradually opening up its financial system, which was one of the key requisites as part of the “phase one” Sino-US trade deal.
Foreign companies have been lobbying to enter the onshore financial services market valued at $45 trillion but China has been very careful in allowing the foray of overseas companies in its region, assessing he impact of such a move on its job market, competition to be faced by its homegrown companies and the movement of capital across its borders.
Nonetheless, there should be close contest in the Chinese payments market as more than 260 firms received payment licenses. This should increase rivalry between companies, which via innovative products and services will try and grab market share. However, payments companies abroad that are willing to do business in China are mandated to keep data locally, set up local units and establish payment infrastructure.
In February 2020, another company in the payment processing space, Mastercard Inc. (MA - Free Report) , too got an approval from the PBOC to set up Chinese joint venture for executing bank card clearing business operations in the country.
However, it is difficult for foreign entities to gain a pie of the local Chinese payments market, yet they stand a chance to compete in the cross-border payment market. Per a Frost & Sullivan research report, the mobile payment market is expected to grow 21.8% in 2023 from the 2017-level, attributed to the flourishing e-commerce platforms. In fact, going by the aforementioned report, active mobile payment customers’ number will shoot up to 956 million in 2023 from 562 million in 2017.
In three months’ time, the stock has rallied 18.4% compared with its industry’s growth of 30.7%.
American Express carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>