China Urges Visa and Mastercard to Lower Transaction Fees for Foreign Card Acceptance

Hey Payments Fanatic!

China is actively encouraging Visa and Mastercard to reduce their transaction fees in the country. This initiative aims to facilitate payments for foreign visitors and enhance the acceptance of international cards among local merchants.

The Payment & Clearing Association of China has been in discussions with global card issuers, including Visa and Mastercard, to reduce the fees charged to local merchants on foreign card transactions. The association has proposed lowering the fee from the current 2-3% range to 1.5%, according to a source familiar with the matter who requested anonymity.

Negotiations are ongoing, and details of the proposed fee reduction may still change.

Mastercard has confirmed receiving the proposal and expressed its willingness to collaborate with partners in the payment industry to lower costs for local merchants accepting foreign bank cards. The company issued an official statement affirming its commitment to working towards this goal.

However, the Payment & Clearing Association of China and Visa have not yet responded to requests for comment. In a previous statement, Visa’s Asia Pacific Chairman, Chris Clark, mentioned that the company plans to work with lenders under the guidance of China’s central bank to encourage merchants' acceptance of foreign cards. Visa also aims to strengthen its partnerships with WeChat Pay and Alipay to facilitate linking Visa cards to these popular payment services.

The industry group announced the fee reduction proposal earlier this week, advising global card issuers to coordinate with their network members to implement preferential fees. This move is intended to boost the willingness of local merchants to accept foreign bank cards.

China’s retail sector has become increasingly digitized and cashless. However, many merchants remain hesitant to accept foreign bank cards due to high processing fees. To address this issue, China is seeking to lower these fees to make payments more convenient for foreign visitors. In March, the State Council urged local authorities to encourage more merchants to accept foreign cards.

This initiative is part of a broader effort by China to make travel and payments easier for foreigners, with additional measures including streamlined visa application processes and mandates for mid- to high-end hotels to accept foreign bank cards.

By reducing transaction fees and increasing the acceptance of foreign cards, China aims to create a more welcoming environment for international visitors, ultimately boosting tourism and business travel.

Have a great start to the week and I'll be back with more Payments news in your inbox tomorrow!

Cheers,

Marcel

INSIGHTS

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Retail Omnichannel & Retail Online Payments.

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GOLDEN NUGGET

How does 𝐜𝐮𝐫𝐫𝐞𝐧𝐜𝐲 𝐜𝐨𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧 work when we swipe a Credit Card abroad?

The diagram shows a comparison of two types of currency conversions:

► Conversion at the card networks

► Conversion at PoS (DCC, Dynamic Currency Conversion)

𝐂𝐨𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧 𝐚𝐭 𝐭𝐡𝐞 𝐜𝐚𝐫𝐝 𝐧𝐞𝐭𝐰𝐨𝐫𝐤𝐬

Steps 1️⃣-3️⃣ A US cardholder travels to India and swipes the credit card for 1000 INR at the merchant’s POS terminal.

The acquirer sends the transaction to the card network, which talks with the issuing bank.

Steps 4️⃣-5️⃣ The card network exchanges 1000 INR to 12.6 USD based on the foreign exchange rate provided by a cross-border payment provider.

The card network also charges a small percentage for a foreign transaction fee. In our case, 1% is charged. The transaction is sent to the issuing bank.

Step 6️⃣ The cardholder pays the credit card bill in USD, which is composed of 3 parts:

- USD amount that is equivalent to 1000 INR

- foreign transaction fee paid to the card network

- foreign transaction fee paid to the issuing bank (some issuers don’t charge for this)

𝐂𝐨𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧 𝐚𝐭 𝐏𝐨𝐒 (𝐃𝐂𝐂)

Steps 1️⃣-3️⃣: A US cardholder travels to India and swipes the credit card for 1000 INR at the merchant’s POS terminal.

The terminal sends a DCC look-up request via PSP (Payment Service Provider), asking for a conversion rate.

Steps 4️⃣-5️⃣ The DCC provider returns the converted amount and the exchange rate, which are presented to the user at PoS terminal.

Steps 6️⃣-8️⃣ The user authorizes the payment in DCC, and the transaction is sent to the card network, the card issuing bank.

The cardholder pays the credit card bill in USD.

DCC usually charges a more expensive rate.

Source: Hua Li from ByteByteGo (👈 follow these accounts for more great payments insights like this piece👌)

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