Is the payment market really global?
In the age of globalism, payment nationalism is still an existing phenomenon. Whether the recent mercantilist trade agreement between the U.S. and China will have an impact on it, only future can tell.
Payments matter enormously, greasing the skids of economic growth and boosting consumer welfare. It’s a sector where – for the moment – the U.S. enjoys a competitive advantage. However, there are many efforts to run national payment systems and some of them actually succed. In our blogpost we sum up the report published on paymentssource.com.
While few argue every country needs its own protected national champion(s) producing wine, stinky cheese, etc, it is also obvious that favoring national players puts a damper on payments competition, innovation, and services to banks, merchants, and consumers.
Phase 1 of the mercantilist trade agreement between the U.S. and China was inked January 15, promising yet again to open China’s payments market.
The agreement requires that Beijing expeditiously accept and process applications by American payment systems to clear domestic card transactions. Skepticism is warranted. The world’s second-largest electronic payments market is trade liberalizers’ bête noire. Beijing signed trade memoranda with the U.S. in 1989, 1992, 1995, and 1996, none of which it honored. However, there still hasn’t been a single domestic Visa, Mastercard, PayPal, American Express, or Discover transaction in China.
Notwithstanding the Trump administration’s saber-rattling on trade and tariffs, the U.S. electronic payments market is wide open. Foreign systems like JCB, Alipay, WeChat Pay and China UnionPay compete freely.
While mercantilist national systems on standalone economic merits doesn’t bear scrutiny, there may be a national-security rationale. Washington banned U.S.-domiciled Visa, Mastercard, American Express, PayPal and Discover, from serving pariah states like Iran, North Korea and Syria. If, however, the world’s dominant payment systems were Chinese, Russian, Turkish or French, would that instrument be used more benignly?