Bank of East Asia (BEA), one of the first few overseas banks to be locally incorporated on the mainland, has passed central bank tests for its debit card operations, making it the first overseas lender to possibly issue its own debit cards.

The Hong Kong-based BEA said yesterday its system met safety and technical standards set by the People's Bank of China, putting it ahead of other overseas banks such as HSBC and Citigroup in efforts to break into the mainland's fledgling bank card market.

BEA said it is working closely with China UnionPay, the only credit card organization on the mainland, to become a qualified issuer of yuan debit cards that comply with UnionPay's payment system.

The bank was one of the first overseas lenders to apply for the lucrative yuan-denominated bank card business last June. The China Banking Regulatory Commission gave the green light for BEA to prepare for the business last September.

More Chinese are reportedly using bank cards, with retail sales paid by credit and debit cards surging 58 percent last year to 2.99 trillion yuan.

Bank card spending, excluding real estate transactions, made up 21.9 percent of retail sales, up 4.9 percentage points year-on-year, central bank figures showed.

At the end of last year, there were 1.5 billion bank cards on the mainland, up 32.6 percent from a year earlier. These included 1.41 billion debit cards, up 30.4 percent, and 90.26 million credit cards, an 82 percent jump.

Three other overseas banks, including HSBC, Citigroup and Standard Chartered Bank, are among the first batch to file applications for issuing yuan-denominated bank cards, which is expected to help them further penetrate mainland's retail banking market following their local incorporations last year.

"We are very pleased that BEA's debit card system passed the examination by the People's Bank of China, which means significant progress in our efforts to issue China UnionPay-standard yuan debit cards," said executive vice-president of BEA China Lam Chi Man.

"With a formal issuance, BEA will offer more convenient and better yuan-denominated savings and wealth management services for local clients," he added.

Analysts said the participation of overseas banks will result in a more competitive debit and credit card market on the mainland, where the profit margin of the business is considered thin even as competition heats up.

Jeffrey Chen, president of China CITIC Bank's credit card center, said the level of profit generated from the business on the mainland is only half of the world average.

(China Daily May 7, 2008)