NEW YORK (AP) — The Chinese are spending trillions of dollars on their credit and debit cards, and U.S. companies are finally getting a slice of that giant pie.
China announced Wednesday that foreign companies like Visa, MasterCard and American Express can bring their payment processing networks into that country, starting June 1.
The news sent shares of Visa and MasterCard soaring.
The Chinese payment industry is massive, and up until this announcement, was closed off to foreign-owned companies.
While foreigners or locals in the world's second-largest economy could use their Visa or MasterCard, the companies were charged a fee by a government-approved company called UnionPay to process transactions. Chinese Visas or MasterCards had to be co-branded with UnionPay.
Customers in China spent $5.2 trillion on UnionPay's network in 2013, according to China's Central Bank, up 48 percent from the year before. By comparison, Visa handled $6.9 trillion in transactions on its global network in the same year.
"China obviously represents a massive opportunity for the networks ... and one that the networks have been attempting to access for years," Keefe, Bruyette & Woods analyst Sanjay Sakhrani said.
Visa, MasterCard and American Express now will be allowed to set up their own networks in China through a subsidiary, China's State Council said. The move is an effort to "promote healthy competition in the country's bankcard clearing market," the regulator said.
China's payment industry has been a sore spot between the U.S. and that country for some time. The World Trade Organization ruled in 2012 that UnionPay was effectively a government-sanctioned monopoly.
Payment processors make most of their money by charging a small fee on every transaction in their networks. Access to China's growing market could generate a significant amount of new revenue for Visa, MasterCard and American Express, once they establish a presence there.
"We are hopeful these new regulations will permit additional participants in the Chinese domestic market," said Visa spokesman Paul Cohen.
MasterCard said China's announcement was a "step in the right direction."
Visa's stock jumped $2.86, or 4 percent, to $68.21 in afternoon trading and MasterCard rose $3.73, also 4 percent, to $91.50.