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UnionPay, Third-Party Clearinghouse Clash in China’s Race to Go Cashless

By Zhang Yuzhe and Dong Tongjian
UnionPay's recent move to tie bank cards to online retailer JD.com Inc. has called into question the division between China's two cashless-payment clearing systems. Above, UnionPay hosts a table at the 25th China International Financial Exhibition in Beijing on July 27. Photo: Visual China
UnionPay's recent move to tie bank cards to online retailer JD.com Inc. has called into question the division between China's two cashless-payment clearing systems. Above, UnionPay hosts a table at the 25th China International Financial Exhibition in Beijing on July 27. Photo: Visual China

The boundary between China’s two cashless-payment clearing systems is not as well-defined as it seems.

When a shopper pays with a bank card, the transaction is cleared directly through China UnionPay, which settles the payment between the merchant and the card-issuing bank.

But when the shopper pays through a nonbank platform — a so-called third-party payment service provider such as Alipay or WeChat Pay — the transaction will be cleared through a central bank-administered clearinghouse, which settles the payment between the merchant and the platform to which the shopper’s commercial bank account is linked.

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