News

Economists say China's ATM, POS infrastructure must become priority

January 15, 2002

BEIJING -- China should speed up establishment of its "Golden Card" project, aimed at connecting domestic commercial banks' ATM and point-of-sale (POS) networks nationwide for customer convenience, experts said.

In an interview with the China Daily, Huang Jinlao, an expert with the International Finance Research Institute under the Bank of China, said the central bank's recent decision to apply the "Yinlian" banking card in five major Chinese cities marked a major breakthrough in expansion of the nationwide payment system.

Earlier this month, Chinese "Yinlian" bank card holders in Beijing, Shanghai, Guangzhou, Hangzhou and Shenzhen could begin withdrawing cash from ATMs belonging to any bank and use only one POS terminal to do the settlement. Until then, card holders were only allowed to use the ATMs or POS terminals provided by a specified bank.

In the works since 1993, the "Golden Card" project has been slow to take off because large commercial banks are reluctant to let their ATMs and POS terminals connect with those owned by others, according to the China Daily report.

Statistics from the central bank indicate that 55 financial institutions in China -- four state-owned commercial banks, 10 shareholding commercial banks, one post office, 29 city commercial banks and 11 rural credit unions -- had issued 330 million bank cards through June.

But only one per cent of all consumption volume nationwide was conducted via bank cards.

"Domestic financial institutions will have to speed up the inter-linking of different bank cards to improve their service because foreign competitors will be pouring in now that China is a member of the World Trade Organization (WTO)," said Niu Li, an economist with the State Information Centre.

While China's robust economic growth in the past years has yielded increased demand for consumer credit, domestic banks lag far behind foreign competitors in terms of experience and infrastructure.

The credit card service is viewed as a hot spot in the contest between domestic and foreign banks following China's WTO entry, Niu Li said. China's annual lending interest rate is six per cent, while the overdraft interest rate is 18 per cent, which has made many foreign banks "drool" over the domestic credit card business, he said.

The banking card used by most bank clients in China is a type of deposit card that bans overdrafts.