Israeli credit card company Leumi Card Ltd. has signed a cooperation agreement with Chinese credit card giant China UnionPay (CUP). Under the terms of the agreement, Leumi Card will be able to clear UnionPay cards in Israel. UnionPay controls 100% of the credit card market share in China. Until now, these cards were not honored in Israel.
Leumi Card is effectively becoming a member of the International UnionPay organization. The partnership is non-exclusive, so it is possible that other Israeli credit cards will sign similar agreements in the future. Under the management of Hagai Heller, Leumi Card began working on the initiative three years ago, but the talks only recently matured into an agreement.
40,000 Chinese tourists visit Israel each year, and the number of visitors is rising rapidly. Chinese tourists who visit Israel are considered well-off, and make many purchases while in Israel, particularly jewelry. Leumi Card estimates that the potential transactions could total hundreds of millions of shekels each year (annual credit card transactions in Israel total NIS 250 billion).
A significant collaboration
Aside from the tourists, the partnership agreement will enable Internet companies, or Israeli companies that sell online, to process orders from customers in China.
“We are seeing more and more of our customers in Israel. We believe in a policy of ‘follow your customer.’ For this reason, this cooperation with Leumi Card is important to us,” said UnionPay International CEO Jianbo Cai. Cai said he hopes the cooperation with Leumi Card will expand to include issuing joint credit cards.
“This is a significant collaboration for Leumi Group. I have no doubt that it will bring other commercial collaborations to strengthen ties between Israel and China,” said Leumi Card Chairman and Head of Leumi Banking Division Tamar Yassur.
It is expected that Israeli businesses will pay higher transaction fees to process UnionPay credit cards than they do for regular transactions, because the interchange fee to UnionPay will be higher than the interchange fee in Israel, which is 0.7%. Furthermore, it will be necessary to make technological adjustments in Israel in order to complete the process, because Chinese credit cards are smart cards, meaning all the credit card processing devices in Israel will need to be modified in order to read them.
The author is a guest of Bank Leumi in Shanghai.