Shenzhen stores refuse bank cards after failing to reach agreement with Unionpay

Major stores in south China's Shenzhen city started Wednesday to refuse bank cards in response to the breakdown in negotiations with China Unionpay on transaction fees.

Local consumers were told that their bank cards could not work in many stores' POS (point-of-sale) service system due to "technical problems" on June 2 and 3.

The action was the stores' reaction to the failure of their demand to decrease the card use fee, which was refused by the China UnionPay Company Limited, a Shanghai-based national payment network sponsored by many of China's major banks.

Many local residents expressed their complaints about the inconvenience caused by the disputes. The local consumer association said any move should not bring loss for the consumers.

On behalf of its members, the local retailer association sent aletter to the branch of China Unionpay on Feb. 27, asking to cut the card use fee rate by 0.5 percentage.

The retailers complained that their profits were very low because of too fierce competition, and that the current rate, fromone percent to 1.5 percent, was too high for them.

There are more than 200,000 chain stores in Shenzhen, but only several thousand of them accept bank cards. The too high card use fee is one major cause blocking greater use of the bank card, according to a delegate of the association.

China Unionpay insisted that their charge was not high comparedwith those in other cities and countries.

"We have invested several billion US dollars in the infrastructure, like POS and ATM. We are still suffering the loss,not to mention the other service of banks," said Wang Feng, a staff of China Unionpay.

Unionpay agreed to decrease the rate to 0.9 percent if the total volume of card consumption in those stores rose by 60 percent, and to 0.8 percent if 100 percent increase is eyed.

There was no major progress made in the following three negotiations. On April 27, the association published a notice threatening further actions if no clear written answer was received from the Unionpay before May 10.

The latest negotiation on May 20, also attended by the local government and the consumer association, resulted in failure because of too great a distance between the two sides' stances.

The local government declined to intervene in the bilateral negotiation but opposed any drastic move by the two sides.

The delegate from the local government suggested that both sides should focus on the potential development of bank card consumption, which increased by over 100 percent from 2002 to 2003in Shenzhen, from 7 billion yuan to 15.6 billion yuan (from 0.84 to 1.88 billion US dollars).

He said both sides would benefit from the rapid growth of the bank card consumption, but both of them would suffer loss from thedisruption of cooperation.

China had issued 690 million bank cards by the end of the firstquarter of this year. The number of franchised businesses under the bank card regime amounted to 540,000, and that of bank card issuers to 141 nationwide.

Latest statistics show that currently in China for every one yuan worth of consumption about 0.2 yuan is paid through the bank card service system, or 20 percent of total consumption.

China Unionpay is a shareholding financial institution established through capital contributions by over 80 domestic financial institutions in 2002. Bank cards carrying a UnionPay logo, including those issued by the country's major banks, may be used for payment or withdrawing cash from ATMs owned by other member banks in and outside places of residence within China, including Hong Kong.

Source: Xinhua