Entering the market for financial services in transitional economies : A case study of credit cards in China

Purpose – The purpose of this paper is to explore the opportunities and challenges for “foreign” financial institutions who wish to enter the Chinese market. It uses the credit card product to illustrate the complexities of this market. Design/methodology/approach – Building on a literature review of how other transitional economies have dealt with the introduction of competitive financial services into their markets, the paper uses secondary research sources to consider some of the Chinese cultural nuances about savings and consumption that foreign entrants will need to be aware of. The credit card provides a mechanism, both to better explain these nuances and to demonstrate the entry strategies used to date by foreign credit card issuers. Findings – There is much work yet to be done by the Chinese authorities to establish an infrastructure for payment cards and to encourage consumers to hold and use such cards. Foreign entrants, whilst constrained by the regulations restricting entry into the Chinese financial services markets, need also to be aware of some of the cultural impediments to the use of payment cards, particularly credit cards. Research limitations/implications – Further empirical research now needs to be conducted to explore the attitudes of Chinese consumers towards using credit cards and the willingness of Chinese merchants to accept such cards for payment. Foreign entrants, both actual and prospective need to be aware of the unique culture of China and how concepts such as Guanxi will impact upon the success of their entry strategies into this market. Originality/value – The paper adds to the very limited literature on financial services in China and has value in that it encourages bank marketers to understand the cultural environment of the market that they are trying to penetrate.