China is partnering with African fintech companies and banks as part of a much larger plan to ensure that its local currency gains wider acceptance around the world. Ever since China replaced Japan as the world’s second-largest economy in 2011, the Asian superpower has made efforts to challenge the dominance of the United States dollar by increasing the use of its local currency (yuan) in international payments.
As a strategic step towards achieving this, China launched the Belt and Road Initiative (BRI) in 2013. Officially named One Belt One Road, BRI is a soft power strategy which seeks to boost the economic and cultural impact of China in Asia, the Middle East, Africa and South America. Do note that soft power involves shaping the preferences of others through appeal and attraction.
The initiative allocates billions of dollars per year to the funding of infrastructure and other initiatives in the countries around the world. There are a variety of African nations, including Nigeria, Kenya, Zambia and Tanzania, on board.
As we’ve seen since the launch of BRI, China has tried to increase the penetration of its currency in African countries via fintech partnerships. Chinese payment giant, Union Pay, partners with some of Africa’s leading fintech companies and banks, with the aim of boosting economic relations and acceptance of the Yuan in Africa. Some of the partnerships we’ve seen are:
Union Partners with Interswitch East Africa
On the 9th of September 2020, UnionPay International disclosed a partnership with Interswitch East Africa, the regional company of the Interswitch Group which is headquartered in Nigeria. Interswitch became a Third-Party Service Provider (TPSP) for China’s UnionPay under the partnership. This implies that UnionPay cards will be accepted in the East African region through ATMs, Points of Sale, QR Payments, and online payments.
UnionPay Partners with Interswitch to Reach West Africa
In 2013, UnionPay partnered with Interswitch to allow UnionPay cardholders to make purchases in West Africa and Uganda at more than 11,000 ATMs and 70,000 merchants. The new alliance expanded the scope of UnionPay to more African countries whilst enabling transactions abroad for Chinese travelers.
In a statement announcing the new partnership, Interswitch Group said these efforts would eventually change the existing payment environment and, in turn, improve the lives of mass markets in Africa.
Union Pay partners with African Banks
In 2015, UnionPay began issuing bank cards in South Africa to Chinese residents in the country. By late 2019, it partnered with Standard Bank, one of South Africa’s biggest banks, to issue cards to customers. In June 2020, the Chinese company struck another deal with another South African bank, First National Bank (FNB) to support contactless payments in the country.
In 2015, UnionPay started issuing bank cards to Chinese residents in South Africa. In 2019, the Asian fintech company partnered with Standard bank, one of South Africa’s largest banks to issue cards to customers in the country. In June 2020, the Chinese company signed another agreement to promote contactless payments in the country with another South African bank, First National Bank (FNB).
In Africa, UnionPay cards are issued in South Africa, Ghana, Mauritius, Kenya, Seychelles and a few others.
These UnionPay partnerships are part of China’s strategy of making a greater impact in the global financial system. BRI also ensure that all Chinese companies continue to embrace and serve the country’s grand foreign policy vision.