Chinas National Payment System on Right Track

Speaking at the Asian Banking Journal conference in Shanghai, Raj Lorenz, NETS General Manager for International Markets, said: “The People’s Bank of China has struck the right balance between co-operation and competition to provide the framework for an efficient national payment infrastructure.” NETS is uniquely qualified to comment on this issue having established Singapore’s electronic payments system 20 years ago. Today, NETS brings secure and reliable payment convenience to consumers and merchants in Singapore. It allows consumers to use their ATM cards to make payments and receive cash at more than 30,000 points of sale. In fact, around 40% of all retail transactions are made on the NETS system. Mr Lorenz said there were common features between countries that had built successful national payment infrastructure. Like the NETS system in Singapore, the China Union Pay (CUP) network would allow banks to issue their own debit cards to be used on a single system. CUP is an electronic payments provider similar to NETS, which supports electronic transactions for banks and financial institutions throughout Mainland China. “Some other countries in Asia have been less fortunate and despite many years of trying, have not been able to develop their own payment infrastructure. “Payment networks need a certain critical mass and if there are too may networks in the initial stages, there is a risk that no network gains sufficient scale and all may eventually fail.” Mr Lorenz said that while banks compete fiercely for end-consumers and merchants, they need to cooperate to build a common payment infrastructure. “Building a payment infrastructure is a time-consuming and capital intensive process. The payback period is long, the risks of technology obsolescence is high and returns on a per transaction basis are low.” However, while individual returns were low, they were recurring and a payment network could deliver sizeable returns over time to enable continued investment in the growth of the network. Mr Lorenz said that while banks needed to co-operate, regulators had a key role in ensuring that payment systems gained sufficient scale to survive. “In Singapore 20 years ago, the Monetary Authority of Singapore played a key role in the formation of NETS and getting the banks to follow a common path and I understand the People’s Bank of China has taken similar steps to create the China Union Pay infrastructure.”