Credit card market in China has grown rapidly in recent years. The number of credit cards issued stood at X million in June 2011, representing y-o-y growth of Y%. Drivers of growth include China's large population, urbanization, rising middle class and incomes. However, challenges remain such as a traditionally savings-focused consumer base and rising bad debts. The market is expected to see further expansion in non-core businesses, EMV standards, and alternative payment systems, while competition among domestic and foreign banks intensifies.

1. Credit Card Market – China
September 2011

2. Executive Summary
Credit card market in China is has been demonstrating rapid growth and development over the past few years
Market Credit card circulation in China stood at X mn cards in Jun 2011, y-o-y growth of Y%
No. of credit cards in China is expected rise to Z bn by 20--
Drivers: Challenges:
- Huge population and accelerating urbanization - Savings oriented consumer base
- China’s young population - Bad debt continue to rise
- Rising middle class and increasing income - Credit card misuse
Drivers &
E
- Changing lifestyle and rising acceptance of credit cards - Barriers to entry
Challenges
L
as a mode of payment - Alternative payment system
P
- Online payment on the rise
- International comparison suggests growth in the
M
domestic market
A
Non-core businesses will further be outsourced Consumer management system
Trends EMV payment standard cards
S
Alternative payment system
Contactless credit cards
Octopus cards
Government New measures to protect the credit card holders
Initiatives Consequences faced for violation
China Banking Regulatory Commission updates credit card rules to prevent credit card misuse
Major Players
Competition
Company 1 Company 2 Company 3 Company 4 Company 5
2

3. •Introduction
•Market Overview
•Card Payment Cycle
•Drivers & Challenges
•Trends
•Government Initiatives
•Competition
•Key Developments
•Key takeaways
CREDIT CARD MARKET IN CHINA 2011.PPT 3

4. Global credit card market will continue to see rise in credit
card usage and competition in the coming years
Overview of Global Credit Card Market Share of Credit Cards in Global Market (20--)
• Global credit card market exhibits intense Segment 1
Credit cards
competition bn Segment 2 accounts foe about
In 20--, nearly XX bn credit card transactions had taken b% of the total
place 8 payment cards
X
• In 20--, Region 2 has overtaken Region 2 in credit 6
Y
cards issue
E
4
However, if we consider the P mn retailer cards in
L
Region 2 then is still by far the largest global market for 2 Z
P
credit cards
0
• Over the past few years, growth of credit and Total no. of payment cards
debit card market in the Asia Pacific region has
mainly been driven by China
AM Global Market Share of the Credit Card Brands
S
Growth in number of credit cards in China had been b%
per year on an average from 20-- to 20--
Brand 1 S7%
Value of credit-card transactions increased by c% in the S1%
Brand 2
same period
Brand 3 S6% S5%
• In 20--, Company 1 has surpassed Company 2 to S4%
become the largest credit card brand in the world Brand 4
Nonetheless, Company 2executives derive consolation Brand 5 S3%
from the fact that the majority of Company 2 cards, Brand 6
almost c%, circulate in China and Company 1 is still well Others S2%
ahead in terms of usage and spending around the world
Source:
CREDIT CARD MARKET IN CHINA 2011.PPT 4

5. …explosive growth in card usage and profitability over the
coming years
Overview of China’s Credit Card Market (2/2) Growth in Credit Card Turnover
• Chinese credit card market still has ample scope for USD bn
A% Y
development and growth when compared with the 800
global credit card market 600 X
Total Credit & Debit Card Transactions
Country 400
(20--)
E
200
A1 P bn
A2
A3
Q bn
R bn
PL 0
2009 2010
Rise in Consumer Credit Card Spending
AM Rise in Pretax Profit per Credit Card
USD bn
400
300 M
C%
S
N
30
20
USD
B%
B
200
10 A
100
0 0
2009 2010 2010 2025
Source:
CREDIT CARD MARKET IN CHINA 2011.PPT 5

6. Traditional stakeholders in the card payments cycle
Goods & services > Card holders < Credit card statement
< Credit card payment < Payment of credit card bill
Issuing banks
Merchants
TPPs
< Merchant discount rate Commission >
Card receipt > < Settlement
Acquiring banks
TPPs
Card receipt >
< Interchange
L E Card schemes
MP
SA
Source:
CREDIT CARD MARKET IN CHINA 2011.PPT 6

7. Drivers & Challenges – Summary
Drivers
Huge population and accelerating Challenges
urbanization
Savings oriented consumer base
China’s young population
Bad debt continue to rise
Rising middle class and increasing
income
Credit card misuse
Changing lifestyle and rising
acceptance of credit card as a Foreign entrants faces trouble to
payment mode expand in Chinese credit card market
Online payment on the rise
International comparisons suggest
growth in the domestic market
CREDIT CARD MARKET IN CHINA 2011.PPT 7

8. Summary – Trends
Non-core businesses will further be outsourced
EMV payment standard cards
Contactless credit cards
Trends `
Octopus cards
Consumer management system
Alternative payment system
CREDIT CARD MARKET IN CHINA 2011.PPT 8

9. Competition – Summary (1/2)
Competition – Overview Credit Card Transaction Processor Market*
• Although there is a positive outlook for the credit
A4%
card sector in China, but the global credit card
Company 1 A3% A5%
companies are dissatisfied with their limited access
Company 2
to the Chinese market
Company 3
Company 1 has a monopoly on processing card Company 4 A2%
E
A1%
payments throughout the country
Company 5
• Banks are in a persistent state of aggressive
competition to increase their market shares
PL
M
Banks make efforts like monitor new market demands,
Transaction Processor Structure Comparison
increase credit card varieties and expand service
A
extents to capture more customer in the market
S
Also issue dual-currency credit cards which is beneficial
for most of the traders engaged in oversea business
This has led to the usage of credit cards to become
120
100
80
Company 1
Company 3
Company 5
Company 2
Company 4
t1 r1
more convenient and faster than before 60
• As a result of all these efforts by the players in the 40
market, credit card market will see tremendous t2 r2
20
growth and expansion in future t3 t5 r3 r5
0 t4 r4
2008 2009
Source:
CREDIT CARD MARKET IN CHINA 2011.PPT 9

10. Competition – Summary (2/2)
Top Credit Cards Issuers – Domestic Banks (2010)
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65
USD mn Units mn
13,505.25 A 63.66
8,051.88
L E B 34.77
Loans and
Advances on
Credit Cards
7,939.48
MP C 28.77
No. of Credit
cards in
8,177.40
5,578.45
SA D
E
27.95
24.48
Circulation
6,073.90 F 16.60
2,886.58 G 11.58
Source: Capital IQ; Company Website Note: Industry may have other key players as well in the market
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11. Major Transaction Processors in the Market (1/5)
Company Snapshot: Company 1
Corporate Information Financial Performance
Headquarters City 1 Revenue Revenue Net income
USD bn USD bn
Net Income
Founded 18--
30 X 5
U V
W 4
E
Products Credit payment card products 20
3
L
2
10
P
Key People Person 1 – Designation A 1
0 0
M
2007 2008 2009 2010
A
Business Highlights
S
• Company 1, together with its subsidiaries, provides charge and credit payment card products, and travel-related
services worldwide
Company 1 operates primarily outside the United States, with R offices in T countries
Company sells its products and services to consumers, small businesses, mid-sized companies and large corporations through direct
mail, on-line applications, targeted direct and third-party sales forces and direct response advertising worldwide
• Various kinds of credit cards which the company provides are Type 1, Type 2, Type 3 and Type 4
• Bank 1 and Company 1 announced Card 1 for the first time in Mainland China in Aug 20--
• This card has all the functions and features of Y dual-currency credit cards with two accounts: RMB A/C and USD A/C
Source:
CREDIT CARD MARKET IN CHINA 2011.PPT 11

12. Thank you for the attention
Credit Card Market - China report is a part of Netscribes’ Financial Services Industry Series.
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