By Christine St. Anne, RFi Group
While US card brands dominated the first-half century, Chinese payment firms will grow in importance over the next fifty years, according to the latest research from Morningstar.
The dominance of these Chinese firms will have significant implications for established players such as Visa and Mastercard.
"Much of the growth we expect in the global payment market will come from areas where consumer spending is growing fast and electronic payments are still in their infancy," said the report’s author and Morningstar senior equity analyst, Jim Sinegal.
"In these markets, the Chinese giants are likely to threaten the longstanding dominance of Visa and Mastercard."
The US-based analyst believes that Mastercard in particular will be "somewhat more vulnerable to foreign competitors," given its large presence in emerging markets and smaller relative exposure to the US.
While Sinegal does not see a significant threat from disruptors in the US market, he highlighted that Chinese companies are in the early stages of looking at market opportunities outside of the country. It was only in January, when Alibaba chair Jack Ma met with president Donald Trump to discuss more China-US cross-border commerce.
According to Sinegal, there are two key drivers that will make Chinese firms the most important potential disruptors in the payment space.
The first and most obvious is the sheer size of the Chinese payment market. China UnionPay, for example, is now the largest issuer of credit cards in the world.
The second driver is the ability to Chinese technology firms to leapfrog traditional payment models. Chinese consumers are not only fast adopters of technology, their technology firms have been able to build rival networks to the banks and established card merchants in a relatively short period.