It was an ordinary announcement put out by electronic-payment processing company TSYS.
The Columbus-based firm was announcing a new agreement for China UnionPay Data, a joint-venture partner with TSYS, to process credit cards for Huaxia Bank, one of the largest banks in China. But there was one line in the news release that indicates a new partnership is going well.
"CUP Data now provides processing services for three of the four largest issuing banks in China that use outsourced services to support their payment programs," the release stated.
Two years ago, TSYS, with a stock-market value of $5.8 billion, had no presence in China. Today, they are 44.5 percent business partners with China UnionPay, a company that is sanctioned by the Chinese government, in CUP Data. China UnionPay has six other joint ventures, but TSYS' equity share is easily the largest for a foreign investor, said David Duncan, TSYS managing director of Asia Pacific operations based in Shanghai.
As TSYS came to the conclusion it needed to find a way to penetrate the Chinese market, it made sense to partner with China UnionPay.
"We really want to be successful in anything we do," TSYS Chief Executive Officer Phil Tomlinson said. "If we can be sanctioned by the government, we have a higher chance of success. We have found the folks at CUP Data to be great people — great capitalists. They understand what it takes to be successful."
In two years, CUP Data has made a big dent in a credit card market that is in its infancy.
Consider what the company has accomplished:
- 30 processing agreements.
- 21 credit processing clients.
- Three of the four largest banks that outsource their card processing have signed with CUP Data.
In for a long run
Duncan works closely with CUP Data as it builds its client base and brings those clients on line. He said the potential in China is enormous.
"Let me give you some market facts," Duncan said. "McKenzie Consulting says by 2025 there will be 590 million upper-middle-class Chinese. And by 2011 there will be 290 million middle-class Chinese. In our lifetime, that is the greatest economic expansion that is going to happen."
As TSYS — already established in Europe and Japan — studied other markets for potential expansion, China was an obvious choice.
"We knew to benefit long term, we needed to be there now," Duncan said.
Duncan compares the start of CUP Data with the start of TSYS in the early 1980s. The steady double-digit revenue growth TSYS has experienced for the last two decades should be replicated by CUP Data as more and more credit cards are issued in China.
"As we get to that 590 million upper-middle-class people with massive amounts of discretionary income, we will be in a great position," Duncan said.
"When you think about our business — it's driven by transactions, that's how we earn our revenues — we typically look at markets that have lots of people," Tomlinson said. "Look at Asia, and China, specifically, there are a lot of people. There are not a lot of credit cards as we know them in the states. There is an opportunity for card owners to issue millions and millions of cards."
CUP Data employs 140 people in Shanghai. The entire work force, including the management, is Chinese. TSYS has five employees in China that work with CUP Data. There are two in the United States — one in Atlanta and one in Columbus — who work closely with CUP Data.
"Our focus is to help them with the knowledge to run their business well," Duncan said. "We are providing leadership and guidance on how to manage their business."
The business of CUP Data, with TSYS as a partner, is dramatically different from the way most U.S. companies operate in China.
"It is very different from what you will find with most American companies," Duncan said. "They build a plant and set up to export out of China to the U.S. We are not in China to build products to export. We are in China to build a Chinese business. We don't make grills or tables. We process data."
The international business climate is evolving, and TSYS has set a goal of 30 percent of its revenue coming from overseas by 2010. The biggest bulk of that will be from Europe, but the Asian market will play a role in that growth. Currently, international business accounts for 18 percent of TSYS' revenues.
"That's a big jump and a big challenge," Tomlinson said.