That doesn’t mean Chinese aren’t used to plastic. Local commercial banks in China have issued 1.1 billion bank cards, according to the People's Bank of China, but 1.08 billion are debit cards linked to savings accounts, and can't be used to buy goods on credit.
Only 50 million are credit cards, connected to global card payment brands like Visa and MasterCard, a scant figure in a country with a population well over 1.2 billion.
But use of credit cards is growing as Chinese head overseas and a greater number of retailers in the mainland accept credit cards for payment. The government has also encouraged their use to help reduce corruption in China’s cash-driven society, since transaction records leave a paper trail.
Visa has actively marketed its brand in China for the past few years with an eye on the market’s enormous potential, playing up its Olympic sponsorship ahead of the 2008 games in Beijing, and sponsoring the Chinese track-and-field star Liu Xiang, the country’s best-known athlete.
In its latest branding effort in China, Visa is focusing on young consumers through an online campaign created by BBDO Worldwide, Shanghai and led by Li Sheng, Visa’s Shanghai-based VP of marketing and sponsorship for China.
The Beijing native worked at Visa International’s headquarters in San Francisco before returning to China at the end of 2003. This week, he spoke with AdAgeChina's editor, Normandy Madden, about the campaign and the latest trends affecting China’s credit card industry.
AdAgeChina: Is the number of credit cards in China quite small, considering the country’s population?
Li Sheng: Absolutely. China is still a developing market. But it’s growing quite rapidly.
AdAgeChina: How much does growth depend on the rising number of Chinese traveling overseas?
Mr. Li: The number of Chinese traveling overseas is also growing very strongly, and overall it increases the demand for credit cards. When these Chinese want to make purchases, it leads to greater needs for payment products like Visa.
AdAgeChina: China’s entry into the World Trade Organization has made it easier for financial institutions in general to operate in China this year. What’s the impact for credit card companies like Visa?
Mr. Li: I can’t say too much about this. We’re still waiting for further interpretations about the changes and their relevance to payment systems and payment brands. We do know that foreign banks are allowed to establish branches in China now if they meet all the approvals and foreign banks are about to issue payment cards that meet local regulations.
China Union Pay is currently the only company in China that can do domestic transactions in RMB [China’s currency]. Our main business in China is to serve overseas cardholders coming to China. The inbound travel market is also growing very fast. Also more and more Chinese are starting to go overseas and spending on their Visa card. We’re not in the RMB business.
AdAgeChina: Which is a bigger enemy for Visa in China : global rival MasterCard, or cash?
Mr. Li: Cash, absolutely. Cash is our biggest competition and our mission is to replace cash either in the form of plastic or electronic payments or any other form of payment.
AdAgeChina: Why do Chinese consumers prefer cash over credit cards, even when they travel? Is that changing?
Mr. Li: We are seeing that trend change. The perception of Chinese consumers, a bit outdated one now, is someone always carrying a lot of cash, even when they travel. First of all, people here still are not used to credit or debit cards. Even today, card spending still represents a minority proportion of all expenditures. Your behavior at home influences your behavior when you travel, so the same thing happened overseas. Also, availability was a factor. They didn’t have a card before even going overseas, cash was the only option.
AdAgeChina: The largest denomination in Chinese currency is a 100 RMB note, worth about US$13. With inflation and incomes both rising so quickly in China, how much trouble is caused by not having larger size notes? Can credit cards exploit that, particularly among travelers?
Mr. Li: Cash has a lot of weaknesses and that is one of them. You have to carry a lot of notes and there are issues from that like safety, convenience and expenditure management, keeping track of payments. There is also the cost of cash, like security-related costs--bodyguards--and the cost of lost or stolen notes. Cash has no protection. Those are some of the advantages of a card and that’s why we’re confident that other payment will replace cash in China eventually.
AdAgeChina: Visa’s latest marketing campaign is aimed at twenty-something Chinese, even though there are a lot of wealthy older professionals and entrepreneurs in China right now. Why not focus on more mature high-income adults?
Mr. Li: Our online campaign was designed to target young consumers, 22- or 23-year-olds, which also are the main target for a lot of fast moving consumer goods companies. Younger people in any market represent the future. Second, they are more open to new things. The first consumers to try on a new type of trendy jeans in a market are never 45-year-olds. Another new trend is overseas travel; it is no longer remote to them. They are also the growth engine for China’s outbound travel.
Talking to these people, you have to be where they are, and they are surfing the internet, sending QQs [instant messages], playing computer games. They spend a lot of time online compared to the older demographic. Also, an online campaign allows us to explore some new tactics. It has been an experiment for us, to better understand how we can talk their language. If it’s a trend, we want to be in that space.
Other appointment news in Greater China
[shanghai] China Media Exchange (CMX), the holding company for Publicis Groupe’s media divisions in China, including Zenith Media, Optimedia and Starcom based in Shanghai, has appointed Karl Wu as chief operating officer, responsible for the day-to-day operations. Previously, he was general manager, marketing partnerships for NBA China. Meanwhile, Warren Hui has been promoted to managing director, responsible for TV, print and radio negotiations, from deputy managing director.
[shanghai] TBWA Group’s interactive arm Agency.com has appointed Lincoln Damen as interactive associate creative director, China based in Shanghai. Previously he was multimedia director at WPP Group’s OgilvyOne, Beijing.