The Chinese state-owned financial services corporation UnionPay has been aggressively expanding its bank cards since its creation, capturing 34 percent of the payment card market.
Visa, once a dominant force in the global market for general purpose payment cards, is losing market share fast to UnionPay. In 2014, Visa represented 57.7 percent of the worldwide transaction volume. Visa saw its share decline to 38.7 percent by 2022, seeing much of its volume disappear to UnionPay, who over the same period grew its market share from a modest 10.1 percent to an impressive 34.1 percent. What is behind the meteoric rise of UnionPay?
Creating UnionPay
The rapid rise of UnionPay was noticed by Reuters back in 2014, who made a special report about China’s own card company. UnionPay had grown to become the largest card brand, having 3.53 billion cards in circulation, already processing several trillion dollars in transaction volume since its founding in 2002. While Visa was producing nearly double the transaction volume, UnionPay had its American counterpart in its sights. Reuters noted that UnionPay achieved its large share through acquiring a monopoly on bank card transactions in China.
Meanwhile its primary overseas competitors such as American Express, Mastercard and Visa have to connect with UnionPay’s yuan network. For UnionPay this is a lucrative deal as it allows the company to process all transactions across its network. The bank card company has been able to maintain a 20 percent year-on-year growth over 2012, receiving 5 percent of its revenue from overseas accounts. In November 2014, Apple announced it would add UnionPay to the Chinese version of its App Store. By adding UnionPay to Apple’s virtual storefront, Chinese consumers would finally be able to purchase items from the App Store.
For Apple, adding the native payment method to its store, could unlock a massive new audience, the New York Times noted. The US electronics giant would unlock new momentum in the rapidly expanding economy, the news outlet added. Apple’s senior vice president of Internet Software and Services, Eddy Cue, said in the joint statement that China had already developed to become Apple’s second-largest app market in terms of downloads. By adding UnionPay, the company would add another layer of ease to the customer audience. Apple customers can also link their Apple ID to UnionPay, a much requested feature he added.
Founder and managing director at tech research firm Marbridge Consulting in Beijing, Mark Natkin, told the news outlet that adding UnionPay would have significant impact on Apple’s sales volumes, as the payment option eliminates many steps that dissuade customers from making purchases. Through the addition of UnionPay, Apple smoothed out regulatory hurdles that could potentially harm the company’’s revenue in the region.
By complying to the local governments demands, Apple would maintain its headstart from Google, with the latter being from operating across China. While independent Android stores are circulating in the country, they pose significant hurdles to average consumers who favor the safety of Apple’s App Store and are open to spending larger sums when making a purchase within Apple’s ecosystem.
Adversely, for UnionPay, having access to Apple customers would unlock another large consumer segment. A customer base who is willing to spend more frequently, firmly locking itself in the Apple ecosystem. The deal is especially lucrative as the end of the year is approaching, which means a huge spike in downloads and the subsequent revenue that follows, according to the vice president of mobile application research company App Annie, Junde Yu.
International expansion
Since its establishment in 2002, UnionPay has been expanding rapidly across the globe. In December 2005, Discover Financial Services and China UnionPay celebrated the opening up of Discover’s Pulse network to Chinese travelers. The partnership marked the acceptance of the China UnionPay bank card in the U.S. The launch comes after a long-term agreement was signed in May 2005. After all formal arrangements would be concluded, Discover Customers would see support from over 365,000 connected merchants and 80,000 ATMs across China. UnionPay card holders would be welcomed at over 4 million merchants and cash access locations in North America.
In April 2013, UnionPay International and payment services provider and specialized lender within the U.S, The Bancorp, unveiled they issued the first UnionPay card in the United States. The UnionPay travel card is targeted at American citizens, American tourists and business travelers who frequently travel between the Asia Pacific region and the US. In October 2016, UnionPay International announced its partnership agreement for Germany with B+S Card Service and CardProcess, unlocking access to over 50,000 local merchants, increasing the coverage for UnionPay cards across Germany from 30 percent to 50 percent. The additional support would greatly benefit UnionPay’s European expansion.
At the time of the press release, UnionPay saw coverage in 38 European countries, including support at nearly every ATM in Switzerland, Austria and Iceland. In a statement CEO of UnionPay International, Europe, Cai Jianbo, explained that Europe is crucial for the company’s international expansion. By adding multiple regions to its network it not only supports Chinese citizens during their travels, Jianbo noted, but also global card holders. Meanwhile the card issuer is expanding its support systems, such as a support hotline, global tax refunds and emergent cash assistance. Merchants can offer tailored discounts to their customers. Airlines such as Air France KLM, Lufthansa Finnair among others support online bookings through UnionPay.
In November 2017, Portugal’s largest private bank Millennium bcp signed a partnership with UnionPay International to start issuing cards. In the December 2018 press release, marking the festive launch of the agreement, UnionPay noted that the company has been expanding rapidly across Europe, pointing out important trade and tourist relations China has with the region. Adding UnionPay support allows for easy payments for its customers who travel to European countries. At the time of the statement, UnionPay saw support from 3.3 million merchants across 40 European countries, with all ATMs in Portugal already accepting UnionPay cards. Two years later, in September 2019, UnionPay announced it would launch with its branded cards in the UK, further accelerating its European expansion.
Alex Rolfe from the website Payments Cards & Mobile said UnionPay was seeking new growth opportunities as it faced intensified competition from domestic competitors WeChat Pay and Alipay. The rapid international expansion resulted in strong global support for the card payment provider. By January 2020, UnionPay had expanded its acceptance footprint to 178 countries and regions, it said in a news statement. The global network was supported by 29 million merchants, with 3 million outside of Mainland China. In its communications, UnionPay keeps emphasizing its part to support Chinese travelers, bringing them convenience during their trips.
In December 2022, the card company said in a press release that it had issued 200 million cards outside of Mainland China through its subsidiary UnionPay International. The company had come a long way, it said, starting with 60 members in 2012, now having 2,500 institutions internationally and an acceptance network spanning 181 countries and regions. Across the network, 78 counties and regions support issuing cards provided by UnionPAy. In October 2023, UnionPay signed a partnership agreement with online shopping platform Lazada, who has significant reach in the Southeast Asia region, especially in Thailand.
Country Manager of UnionPay International Thailand, Michael Shang, said in the press release that the partnership with Lazada Thailand marked an important milestone in the company’s international expansion, adding convenience and choice to its customers. Chief Executive Officer, Lazada Thailand, Dr. Werapong Goo, commented in the joint press release that adding UnionPay would strengthen the platform’s payment ecosystem in Thailand and welcome more eCommerce shoppers.
UnionPay has already been present in Thailand through Thai merchants and residents, additionally almost all ATMs and POS terminals across the country support the card option. More than half of the 10 largest banks in Thailand were already issuing cards provided by UnionPay, having around 10 million cards in circulation. In October 2024, Vietnam and China signed 10 deals including payments supported by UnionPay International, who facilitate cross-border payments between the two countries, Reuters noted.
Boosting brand awareness
UnionPay’s product was appealing to developing economies and Chinese travelers, however we cannot understate the importance of marketing campaigns that have boosted the payment cards’ brand recognition. Over the course of the 2010s and into the 2020s, UnionPay launched several advertising campaigns to increase brand awareness. In April 2018, UnionPay International launched its “Fly to the World” campaign, targeted at Chinese tourists who were planning to travel abroad, specifically targeting white-collar workers who prefer to travel long-distance. The Fly to the World themed advertising campaigns offer special discounts and privileges at various merchants and cover the entire trip, the card provider detailed in the press release.
Card holders would be offered discounts at a variety of service providers ranging from department stores, car rentals to tourist attractions. In June 2018, in anticipation of the summer holidays, UnionPay announced its biggest marketing campaign to boost its mobile app adoption. The company highlights that UnionPay mobile app downloads have exceeded 70 million, seeing strong adoption with merchants across the world. Through the summer campaign, UnionPay wants to boost QR-code payments in 70 destinations spread over more than 40 countries, including short-range destinations such as Hong Kong, Taiway, but also farther travel destinations like Europe and the United States.
Over the same period, UnionPay launched a brand awareness campaign with marketing agency RHAD to boost unaided brand recognition in the developing economy of Indonesia. The social media campaign promoted the company’s debit and credit card offering. The small scale marketing efforts helped increase UnionPay’s unaided brand awareness in Indonesia by 4 percent, increasing the brand’s Neilson’s rank from third to fourth place.
In February 2024, the HSBC UnionPay Credit Card launched a cross-border shopping campaign through out-of-home (OOH) channels in anticipation of the Chinese New Year. The advertising material would be placed in the Hong Kong Greater Bay Area and utilizing social media to expand its reach. Out of home channels can be very effective in boosting brand recognition, offering extended brand awareness across different target audiences. The payment card provider had seen moderate success in previous years in Hong Kong and Macau through its issuers Bank of East Asia, ICBC Asia and Shanghai Commercial Bank among others. In January 2019, more than 10,000 local merchants accepted UnionPay’s QR-code payment option.
Cashless payments in China
A major contributing factor in the rise of UnionPay has been the Chinese transition toward a cashless society. Internet behemoths of the Chinese digital economy such as Tencent and Alibaba have accelerated the adoption of cashless payments. The CGAP analyzed the rise of these ecommerce giants and their impact on China’s payment ecosystem. The contours of this transformation started as Alibaba and Tencent were launching their products at the end of the 1990s. By welcoming hundreds of millions users onto their platforms, inadvertently they set in motion a chain reaction that familizard countless Chinese citizens with digital payments.
In 1999, Alibaba launched its business-to-business ecommerce marketplace, enabling companies to purchase goods directly from vendors. The payment would take place through a bank payment. However, there was no safety net that could foster trust with its users. Hence a system needed to be introduced to safely handle payments between customers. In 2003, the platform launched Alipay, which acted as an escrow until the goods were delivered to the customer. The growth of Alipay accelerated when the company launched its wallet solution in 2003, the CGAP noted.
Meanwhile Tencent was developing an online messaging service, seeing massive success with its QQ messaging product. The massive adoption of QQ, turned it into the default messaging service in China. This unlocked the necessary capital for Tencent to expand into the online gaming market, where chat was an important mechanism for players to interact and communicate amongst each other. In order for Tencent to generate revenue for its newly found business, it had developed Tenpay in 2005. The CGAP added that messaging remained foundational for its products.
In 2011, digital payments started to take flight, as Tencent launched its smartphone messaging service, WeChat. Two years later, TenPay was integrated into WeChat and rebranded to WeChat Pay. Users of the service could now easily transfer money through the messaging service. Tencent was able to carve out significant market share, but Alipay remained the dominant force. In December 2022, Tenpay (QQ Wallet and WeChat Pay), represented 38.8 percent of online payments, compared to Alipay, capturing 54.5% of the market.
Cashless payments in China have risen sharply over the last two decades. In 2019, eMarketer estimated that Chinese mobile payments would represent 61 percent of all global mobile payments. India was expected to see similar growth. India saw its own mobile payments revolution, with players such as Google accelerating cashless payments. In China, the QR-code has been the most common mobile payment option. The QR-code has seen wide adoption in countries that still rely on cash such as Japan and Germany. The transaction value of QR-codes in Chinese yuan has accelerated rapidly since the first quarter of 2017, where QR-codes represented 0.6 trillion Chinese yuan.
This figure grew exponentially, doubling to 1.2 trillion yuan by the second quarter. By the end of 2017, QR-codes represented 2.6 trillion yuan and a year later, in the last quarter of 2018, the payment transaction value of QR-codes in China had grown to 7.2 trillion yuan. However, we cannot detach the rise of cashless payments, including the expansion of UnionPay, from the Chinese government’s ambitions to push for a digital yuan, or E-CNY, the Organisation for Research on China and Asia commented and its aim to maintain control and oversight of people’s spending behavior.
Social surveillance system
Back in January 2017, Shazeda Ahmed and Adrian Fong from the interdisciplinary laboratory based in the Munk School of Global Affairs & Public Policy at University of Toronto, Canada, The Citizen Lab, reviewed the rapid roll-out of digital, mobile, payment systems throughout Mainland China. As noted by the CGAP, both observed that the rapid expansion of mobile payments has been instigated through the introduction of Alipay and Tenpay, who quickly onboarded hundreds of millions of Chinese citizens. Basic services could now be completed through mobile payments.
These upcoming mobile payment service providers gradually started to add location tracking to their apps and support for Chinese citizens who travel abroad. Seeing this rapid development, created a blind spot for the Chinese government, Ahmed and Fong noted. The regulatory framework was absent, with local authorities lacking the necessary instruments to safeguard security and data protection. Furthermore, Chinese policy makers want to harness the power of big data to uphold and expand its surveillance systems.
Alipay, the largest of mobile payments systems in Mainland China and having an aggressive expansion strategy abroad, has been part of the pilot for China’s social credit system, which assigns an overall score to a person’s standing. Alipay, part of Alibaba, had been operating through the Cayman Islands, but in 2011, the payment branch, Ant Financial Services was forced to comply with Chinese licensing rules, the researchers highlighted. Under Chinese licensing legislation, companies are banned from operating non-bank payment operations in China when receiving foreign investments. Alipay was forced to operate under a PRC-owned entity.
Alibaba didn’t give up on its international ambitions however, and just like TikTok, the company operates Alipay outside of Mainland China through a dedicated entity called Alipay International. The international version operates separately from Alipay under the Chinese business license, ensuring that its domestic products align with government policies. Ahmed and Fong point toward WeChat who applies similar rules, maintaining separate levels of censorship inside and outside of Mainland China.
While Alibaba operates separate versions from Alipay, Chinese citizens who make bookings and purchases abroad are being tracked by the localized version of the mobile payment system. The Alipay app makes geolocated, personalized recommendations, with refunds being linked and applied to the user’s Alipay account. This, the researchers point out, creates a detailed footprint of Chinese users’ whereabouts and spending habits. How this data is processed, remains vague, forming a worrying precedent that surveillance will increase as digital, cashless payments see greater adoption in due time.
Billions of transactions
The number of global transactions processed by UnionPay has been growing steadily since 2014, seeing strong growth as it expanded across the world. While the number of processed transactions has slowed down over the course of the 2020s, the figures have already surpassed Mastercard and grown way beyond popular brands such as American Express and Discover. In 2014, UnionPay processed a modest 19.75 billion general purpose card payments. By 2018, this number had grown to 98.3 billion and reaching 198 billion by 2021.
In 2023, UnionPay processed 227.92 billion general purpose card transactions. To put the number into perspective, in 2023, MasterCard processed 170.83 billion transactions, American Express a modest 11.44 billion and Discover 4.04 billion. The latter was once a launch partner for UnionPay and now it was surpassed by a wide margin. Only Visa was able to maintain a significant market share, processing 266.51 billion transactions in 2023. UnionPay’s aggressive expansion proved that it could surpass mighty competitors and strong brands over the span of a decade.
In February hundreds of thousands of websites had incorporated UnionPay as a means to process payments across various countries and territories. Over 150,000 websites registered in the United States supported UnionPay’s online payment system. This was followed by the UK, where 71,366 websites offered UnionPay. In third came Australia with a little over 57,716 websites supporting the Chinese payment option. Across the world, many thousands of websites incorporated UnionPay.
The Chinese payment service provider has cast a wide net and together with its rivals Alipay, it’s offering increased convenience to Chinese citizens, abroad and at home. UnionPay is still expanding, especially in developing economies such as Thailand and Indonesia, where novel payment options are making their way into people’s daily lives. There’s no immediate threat for established parties such as Visa and Mastercard, but tapping into new growth areas will be ever more difficult as Chinese payment providers like UnionPay claim market share through aggressive expansion strategies.
