Bank of America will join with China Construction Bank to offer credit cards in China.
Bank of America plans to join forces with China Construction Bank to offer credit cards to Chinese consumers.
Their two-stage business plan involves CCB first establishing an independent credit card division, with Bank of America supplying consulting services. The credit card unit would later be spun off as a co-branded joint venture. CCB would own 63 percent of this joint venture and BofA the remaining 37 percent.
Bank of America will acquire the stake following approval from the Chinese government, which intends to change the way joint ventures are regulated.
BofA CEO Ken Lewis said that for his bank, the deal represents a strategic collaboration in one of the world’s fastest-growing economies. He added that the collaboration enables Bank of America to deepen its alliance with CCB while simultaneously positioning BofA to take part in future growth in the Chinese market once new regulations are passed.The move by BofA follows in the footsteps of rivals Citi and HSBC, which have teamed with Shanghai Pudong Development Bank and Bank of Communications, respectively.
China has around 30 million credit card accounts, versus approximately 500 million credit card accounts in the U.S.
CCB stated that 2006 saw a doubling in the number of credit cards issued, card spending, and overdraft balances. The bank has issued 6.34 million credit cards overall, with half that amount coming in 2006 alone. CCB reported that with credit card purchases totaling US$5.24 billion, it has the highest spending per credit card in China.
While CCB also notes that it is China’s No. 2 credit-card issuer with 20 percent of the market, the country has no independent third-party organization to confirm market share claims.