Schemes: Visa versus CUP and BC
- After having had troubles with the Chinese domestic card scheme CUP Visa now faces its South Korean counterpart, BC Card.
- In Korea, the later files a complaint against the international scheme for abuse of market dominance. Visa imposed two 50,000 dollars fines on the local scheme. Both fines result from the use of a, forbidden, direct bilateral link to exchange cross-border transactions: the one with CUP, the other with the US ATM network Star. Visa imposes the use of its network, VDPS or VisaNet.
- These bilateral links allow the acquirers to avoid paying a 1% processing cost to Visa. To this end, BC Card issues cards cobadged with CUP for Chinese customers and allows CUP’s acceptance to spread with merchants.
- CUP is no longer alone to fight Visa in Asia: it filed complaints in spring 2010 as Visa imposed sanctions on banks using CUP network to exchange CUP/Visa cobadged card transactions. CUP and BC do not want to pay Visa’s brand fees on local operations.
- Since October 2010, a Sino-Korean agreement has set up direct acceptance of CUP in South Korea, with the help of the Korean tourist information office. CUP brand was accepted in 2005 and went from 4,000 merchants and 5,000 equipped ATMs in Korea in 2010 to 10,000 and 11,000 respectively by mid-2011. BC is accepted in the United States in Discover scheme’s networks, including at PULSE networks’ ATMs and with Diners’ Club acceptors.
- MasterCard is taking advantage of this confrontation. The September 2010 MoU on its collaboration with CUP has just been widened. It plans the use of MasterCard’s gateway to exchange transactions carried out with CUP cards on e-commerce websites outside of China. Other co-operations on innovative means of payments are currently under consideration.
- In Spain, CUP has significantly widened its acceptance network through an agreement with Sistema 4B signed on 30 June 2011. The largest of the three Spanish national card schemes opens all its ATMs as well as 400,000 POS terminals to Chinese cardholders. Also, La Caixa, Citi and EURO000 (network of saving banks) already opened their ATM parks to CUP. 60% of the ATMs in Spain are now open to CUP cardholders.
See March-April, June, September and November 2010 Watches.