UnionPay

UnionPay is a payment card network headquartered in Shanghai. Its full name is China UnionPay, and it operates the interbank system through which card transactions in mainland China are switched, cleared and settled between the banks that issue cards and the institutions that serve merchants and operate cash machines. Its cards, most of which have numbers beginning with 62, are issued by Chinese banks and by partner banks in a number of other countries.

Measured by the number of cards in circulation, UnionPay is the largest card network in the world, a reflection of the size of China's banked population. It is one of the global card schemes alongside Visa, Mastercard, American Express, Discover and JCB, although the bulk of its volume is domestic.

Before UnionPay, Chinese banks ran separate regional card networks under a government program to modernize payments, and a card from one bank often could not be used at another bank's terminal or in another city. China UnionPay was established in March 2002, with the approval of the State Council and the People's Bank of China, to merge these networks into a single national system. Its founding shareholders were Chinese commercial banks and other financial institutions.

International expansion began in 2004, starting with acceptance in Hong Kong and Macau, to serve Chinese travelers. A subsidiary, UnionPay International, was set up in 2012 to manage business outside mainland China and to admit overseas members. UnionPay also joined EMVCo, the body that manages chip card specifications, as one of its owner members.

UnionPay follows the four-party card model. Banks issue cards to customers, acquirers sign up merchants, and UnionPay sits between them. It routes authorization messages, calculates the net amounts owed between members and arranges settlement in renminbi through the central bank's payment system. It sets operating rules, technical standards and interchange arrangements for members, within pricing guidelines set by the Chinese authorities.

The network carries debit card, credit card and prepaid transactions as well as cash withdrawals at any automated teller machine connected to it. Chinese chip cards follow a national standard based on EMV, and the contactless feature is branded QuickPass.

Card payments in China were overtaken during the 2010s by mobile wallets, above all Alipay and WeChat Pay, which let users pay by scanning codes and initially connected to banks directly, bypassing the card network. UnionPay responded with its own mobile products. It supports contactless payments through phone wallets, published a QR payment standard for banks, and in 2017 launched a joint mobile app with Chinese banks that combines cards from different issuers.

Regulation also changed the landscape. From 2018, online payments by non-bank payment institutions that involve bank accounts had to be routed through a central clearing platform, NetsUnion, instead of through direct connections to each bank. UnionPay and the large wallets have since agreed to make their QR codes mutually readable in stages.

UnionPay International reports acceptance in more than 180 countries and regions, although the density of acceptance varies widely and is strongest in Asia. Abroad it relies on local acquirers and on agreements with other networks. A long-standing alliance with Discover allows UnionPay cards to be used on Discover's network in the United States, with reciprocal arrangements for Discover cardholders in China.

Cards are also issued outside mainland China, in Hong Kong, Southeast Asia, Central Asia, Russia and elsewhere, sometimes as a second brand on a domestic card. Where international networks have withdrawn from a market, UnionPay has in some cases been adopted by local banks as an alternative for cross-border use, though sanctions risk has made some Chinese and foreign banks cautious. India's RuPay and other national schemes have signed acceptance partnerships with it.

UnionPay is supervised by the People's Bank of China as a bank card clearing institution. For many years it was the only entity permitted to clear renminbi card transactions in mainland China, and foreign-brand cards issued there were dual-branded and processed over its network. A World Trade Organization panel ruled in 2012 that aspects of this arrangement discriminated against foreign suppliers.

China subsequently created a licensing regime for bank card clearing institutions. A joint venture of American Express received the first license for a foreign-invested network in 2020, and a Mastercard joint venture was approved later. These entrants clear domestic renminbi transactions through their own networks, ending UnionPay's formal monopoly, though its domestic position remains dominant.

• UnionPay International