Chinese state-affiliated card network UnionPay is finally hitting Europe through a newly announced partnership with Millennium BCP, the retail brand of Portugal's largest bank, according to Verdict and the South China Morning Post.
Millennium BCP will issue UnionPay-branded consumer and commercial cards that can be used across Europe, marking a first step into the region: Right now, Chinese banks in eight European countries issue UnionPay, but this marks the network's first local partnership.
This news follows rumors earlier this year that UnionPay was finalizing plans to move into Europe, though it was expected that a UK partnership would come first.
Global expansion is a necessary next step for UnionPay as it looks to extend its reach past China amid threats at home.
By the numbers, UnionPay is the largest card provider worldwide, but its slipping dominance is largely concentrated to China and Chinese consumers. In 2017, UnionPay's 6.69 billion cards accounted for 33% of the global card market, making it the largest singular brand, according to The Nilson Report. But it only held 20% of transaction share, likely because China — where customers average 4.5 cards per person — represents 99% of the firm's business, unlike its rivals, which operate a more balanced business globally.
Growth abroad and threats at home could threaten that dominance. UnionPay's share is down from 2016, when the firm held 43% of the global card market, perhaps as a result of gains from rivals. That risk will only magnify as foreign card networks prepare to enter the Chinese card market and begin issuing local products — AmEx has already been approved to enter China in partnership with a local player and is taking steps to begin operating there, and both Visa and Mastercard are deep into the application process — which could take share away from UnionPay. Moreover, the massive and growing popularity of products like Alipay and WeChat Pay in China, which bypass card rails entirely, could further erode the firm's share — which means it would need to find ways to make up ground elsewhere.
Portugal will be a good stepping-stone into the European market, where there's ample room for UnionPay to grow, though threats are following. UnionPay cards are accepted at 3.3 million retailers in 40 countries in Europe alone, a network that expands to 23 million merchants in 170 countries globally.
This will lower roadblocks for customers seeking out the cards, since they'll be able to use them immediately, especially in Portugal, where UnionPay will enable acceptance at 80% of point-of-sale terminals this year and 100% next year. The cards will also be contactless-enabled — in Portugal, utilization is "growing," according to the European Payments Council — which could attract users as well.
If successful, the partnership could help UnionPay move into the large European market, attract more partners, build up an audience, and improve its ability to contend with Visa, Mastercard, and other international rivals as it strives to become a global brand.