Financial Cards and Payments in China

COVID-19 impact on consumer payments

With consumers in China already accustomed to using financial cards through third party payment platforms or direct electronic payment in many scenarios, this meant that they were well prepared in terms of using this technology during the COVID-19 pandemic and the lockdowns implemented to contain its spread. The COVID-19 outbreaks in the country strongly impacted consumer payment transactions during the lockdown periods.

COVID-19 country impact

There was a strict lockdown in Hubei province in China from 23 January to 8 April, while other provinces imposed different social distancing policies and partial lockdowns. Movement in and out of the worst-hit provinces was banned until 4 February, with 14 days quarantine required for those moving between provinces.

Electronic payments thrive as consumers shun the use of cash

Cash and offline financial card transactions were severely impacted during the COVID-19 outbreaks in the country, as the local economies were effectively shut down, with most offline consumption locations closed. However, with the economy reopening from March, the performance of cash and financial cards gradually improved, returning to relatively similar levels to the corresponding period a year earlier.

Consumer payments continue to move from the offline to online sphere

Consumer payment transactions continue to move from offline to online, with this trend being given further impetus by the pandemic and the measures taken to contain its spread in China. During the COVID-19 lockdown period, many offline transactions transferred online, helping to further drive the development of m-commerce, e-commerce and internet service technology.

Entry of foreign credit card players

China is opening its local payments market to foreign companies after a decade of lobbying by foreign players seeking direct access. In June 2020, American Express received approval to start bank card clearing services from The People’s Bank of China, making it the first foreign credit card company to launch onshore operations in China.

What next for consumer payments?

With third party payment platforms and mobile payments already having grown to reach a relatively mature stage in China prior to the arrival of COVID-19 in the country, the pandemic is not expected to have a major impact on overall financial cards market growth in the coming years. A more likely influence on the financial cards market could be the strong competition, making it difficult for players to gain market share, which could slow down the growth in the financial cards market in 2021-2022 and beyond in China, particularly as players focus more on the “quality” of their client base.