UnionPay, a Chinese digital payment solution may begin to gain a wider scale of acceptance in Nigeria as its cards are already accepted for cash withdrawal and balance inquiry at all ATMs except those belonging to Standard Chartered bank.
The two United States payment giants “Mastercard and Visa” have been fighting a battle for supremacy in the payments space which have intensified with the accelerated development of fintechs in the country.
With the UnionPay scheme, China may have a stronger entry into the global financial system with Russia and India showing interest in integrating the Chinese alternative of payment system.
There are more than 7.6 billion UnionPay bank cards around the world, more than double its closest rival, Visa, which has 3.4 billion cards. Union Pay has the biggest market share of 36 percent in global payment ahead of Visa (32 percent) and Mastercard (20 percent).
Nigeria offers Chinese companies a diverse range of commercial and trade opportunities. The importation of Chinese-made consumable and manufactured goods to Nigeria links the two countries together with trading relationship and Nigeria is one of the largest and fastest-growing net importers of physical Chinese goods.
Unionpay has been keen on increasing its activity in African markets and has been active in seeking partnerships with local financial institutions like interSwitch which allows UnionPay cardholders to make transactions in West Africa. The partnership led to more uptake of the cards especially for UnionPay cardholders visiting Nigeria.
Following its 2018 deal with Interswitch, a Nigerian fintech giant which brings together 175 Chinese banking players and South Africa’s Standard Bank.
As a card scheme similar to Visa, Mastercard, Verve, Interswitch’s bank card, Unionpay may begin to gain traction as a payment network in Nigeria as shopping malls, franchise stores and other merchants in Nigeria who receive frequent visits by tourists accept it.
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China sought to challenge the US dollar’s domination of international transactions. An important push to achieve this is the Belt and Road Initiative (BRI) announced in 2013.
BRI is a soft power strategy aimed at the improvement of China’s economic and cultural influence across Asia, the Middle East, Africa and South America. It played a key role in China’s attempt to internationalise the yuan and UnionPay is riding on it.
The initiative committed billions of dollars annually to finance infrastructure and other programmes in participating countries. A number of African countries – Nigeria, Kenya, Zambia and Tanzania – are on board.
However, analysts say the suspension of payment operations by Visa and MasterCard in Russia which led to Moscow’s switch to UnionPay card does not necessitate its acceptance in Nigeria. Yet, available data shows that the move may drive UnionPay’s acceptance.
“Using UnionPay in Russia has no implications for Nigeria, it does not really establish any links,” said Ayorinde Akinloye, a research analyst at United Capital Plc.
Other experts think the the Chinese currency would pose a problem in the takeup.
“If the Chinese choose to use yuan, their capital account is not a free open account, common currency is in dollars and a currency has to be a reserve currency to be used, it has to be an open account to interact with other countries,” said Kaliba Bilala, co-founder Tanabit.
Swift data showed the yuan’s share of global international payments had risen from one percent to 1.91 percent in April 2019. The figure could be higher since China is pushing the Cross-border Interbank Payment System (CIPS), its own alternative to Swift designed to reduce financial risks caused by the US or international sanctions.
Swift is not a United States owned financial telecommunication company, but the American government has a significant influence on its decision with China vulnerable to any financial sanctions caused by disputes with the US.
Mastercard and Visa have been shaken up by the arrival of China’s UnionPay which has been targeting the position of the digital payment giants over the years.
