Illustration: Lu Ting/GT

The State Council's recent decision to open up the domestic bank card clearing market has fueled conjecture that China UnionPay, the State-owned clearing titan whose tricolor logo is omnipresent on Chinese people's bank cards, would inevitably undermine its dominance over the market.

Launched in 2002 by former central bank governor Dai Xianglong, the Shanghai-based bank card company operates the national interbank network, the only one of its kind in the country. The association has a presence in 150 countries and regions outside its home market. Across the globe, there are more than 4.6 billion cards bearing its logo, according to the UnionPay website, which doesn't provide a figure for China alone.

It is evident nonetheless that UnionPay's success has largely depended on its dominant position in its domestic market. By the end of 2014, 4.94 billion bank cards had been issued in the country, according to data from China's central bank. The vast majority of the cards are believed to bear the UnionPay logo.

Many believe the State Council's decision on April 22 heralded the end of UnionPay's dominance. Authorities will adopt a new license management approach for the approval of bank card clearing institutions, the cabinet said. They will begin accepting applications on June 1.

However, none of this means UnionPay will be dethroned as quickly as many people expect.

The announcement of the decision came roughly six months after the cabinet stated that eligible domestic and foreign companies would be able to apply to establish bank card clearing operations. The initial statement didn't provide specifics about opening up the industry.

The latest decision fleshes out the scenario, setting requirements for applicants such as a minimum registered capital of 1 billion yuan ($161 million), more than five years experience in the banking, clearing or settlement industries. Applicants must also have been profitable for at least three straight years.

There aren't too many companies that can meet the requirements. Furthermore, it will take about two years from the effective date of the decision, June 1, for approved companies to begin operating.

This estimate is the result of simple addition based on the information in the April 22 announcement. The announcement said the central bank has three months to decide whether to approve an application after it gains consent from the banking regulator and accepts the application. After getting a preliminary nod, the applicant will be granted one year to prepare to enter the clearing business. It will then have to submit another application to get approval to begin operating. The central bank then has another three months to make its final decision and issue a license. A period of six months will be allocated to the license holder to officially set its business in motion.

UnionPay needs to apply for a license as well, but the bank card association will retain its unrivaled position as the sole national interbank network for yuan-denominated bank card payments for the next two years. Its potential competitors, meanwhile, will be busy with the application process.

For Visa and MasterCard, which have established global brands but remain locked out of the clearing business for yuan-denominated payments, the decision offers the possibility of finally entering the market.

The requirements would hardly be an issue for the established global bank card associations, though they might have to overcome some obstacles. For example, both Visa and MasterCard charge higher commissions than UnionPay. In addition, a different national payment standard for point-of-sale?(POS) systems in China would force them to make a substantial investment to tune their facilities to local standards.

There has been speculation that Industrial and Commercial Bank of China (ICBC), the world-beating Chinese lender as measured by assets, may possibly vie for a place in the market, based on its almost ubiquitous presence and the huge number of cards it has issued.

Then there's UnionPay archrival - e-commerce behemoth Alibaba Group's Alipay payment service - which looks as if it will be one of the top seeds on the list of qualified candidates.

Alipay, with its mobile payment app Alipay?Wallet, has dominated the country's mobile payment market. Alipay has also launched promotional campaigns in metropolises such as Beijing to extend its reach into off-line payments by means such as scanning quick response (QR) codes.

Still, the establishment of an entirely new clearing network might not be the best option for the likes of Alipay, unless there is a drastic increase in payments via QR codes, which allow third-party payment providers to circumvent the current POS system.

As above, it is more likely that interested participants might form several consortiums to compete for operations in the vast market. The fact that only a few bank card associations have lived until now may tell us something about the nature of the sector - it is not quantity that matters.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn