Eighty-five percent of respondents, for example, believe the prospects for credit cards are either highly or somewhat promising. While bankers recognize the considerable challenges, they are bullish about the opportunities and are committed to this rapidly growing market.

One-hundred and fifty-two banking executives representing organisations from all over the world including: Asia-Pacific, North America, Europe, the Middle East, Africa and Latin America took part in the study, which was conducted by the Economist Intelligence Unit on behalf of First Data International, a global leader in electronic commerce and payment services. First Data, an independent payments processor active in the Chinese market today, commissioned the study to gain insights from both national and foreign banking, retail and payment services executives, regarding their experiences conducting business in China as early market entrants, and to identify and understand the challenges and opportunities for organisations that are currently considering market entry. Study participants were either from businesses already operating in China or those that plan to enter the market within three years.

Highlights of the study findings include:

• Retail banks are bullish about consumer banking opportunities - With over one billion cards now in circulation in China - and more than 200 million new cards issued in 2006 alone - it is not surprising that retail bankers are optimistic about credit cards as well as bank accounts. Fifty-five percent of study respondents believe the prospects for credit cards and bank accounts are 'highly promising' over the next three years, putting them at the top of the list. Forty-five percent also highly rate the opportunities for debit cards and 40 percent for wealth and investment management solutions. Overall, respondents are overwhelmingly positive about all aspects of the consumer banking sector.
• The short-term outlook for profits is less certain - The optimism expressed by bankers in the study is accompanied by a strong dose of realism. Forty three percent of retail bankers agree that it will be difficult to make a profit in the credit card market over the next three years, while just 21 believe it is possible. Tough competition for customers and other challenges stand in the way of profits today. Nevertheless, recognizing the scale of the market, and the early signs of change in the spending patterns of Chinese consumers, banks are willing to wait for profits. The opportunity is simply too big to ignore.

"It is clear from our study that banks want to tap into the vast new customer base that awaits them in China, although they're also realistic about the challenges and risks that await them there," said Charles Goddard, editorial director for the Economist Intelligence Unit in Asia Pacific. "The general consensus is that while the risks are high, the rewards for the winners will be equally large."

"While much of the world's attention remains focused on China's IPOs and its booming stock market, an arguably more important development is the emergence of a modern payments infrastructure, supported by efficient systems and sensible credit policies," said Douglas Jaffe, research director, Financial Insights Asia Pacific. "China's long-term economic health necessitates the development of a healthy consumer society, and this means a gradual shift away from cash towards electronic payments and credit-based products. This shift is occurring and evidence can be found in important studies like the one commissioned by First Data."

Additional key findings include

• Infrastructure is key to card market growth - Eight-three percent of study respondents identify infrastructure improvements as the single most important factor in encouraging the increased take-up of card payments in China. Other critical factors include better collaboration between key stakeholders such as banks and payment processors (for 48 percent of respondents) and publicity campaigns (33 percent). Half the survey respondents identify better availability of consumer credit-history data as being critical to support the cards payments infrastructure in China. Additionally, a more extensive card acceptance network is critical - merchant acceptance is still at a low level outside China's major cities - as is a significant expansion of the ATM network, to promote card usage.
• Merchant acquisition is a significant challenge - Convincing merchants to accept credit cards represents a major challenge for banks. Eight out of ten retail bankers polled for this report say that local retailers' preference for cash is a 'very significant' or 'significant' barrier to operating cards and payment services. In part, this is because retailers are not yet experiencing consumer pressure to provide payment card facilities in a society where cash remains the preferred payment method.
• Consumer education is a priority - The study reveals that much work needs to be done to promote a plastic card payment culture in China. In addition to improvements in infrastructure, study respondents recognize that Chinese banks need to do more to educate consumers about the benefits of using payment cards, which will encourage a switch from cash-based transactions to cards.

Although a relatively new product offering in China, respondents to the survey see great potential for revolving credit cards. With more than 50 million credit cards issued, more and more Chinese consumers are coming to value the positive contribution that access to credit can make to their lives, as well as the flexible repayment options that credit cards offer. At the same time, banks that participated in the survey recognized the need for responsible lending - and strong risk management skills - as they develop their credit card programmes.

"China has a population of more than one billion and a card payments market set to grow exponentially over the next five years," said Nigel Lee, president, First Data International, Asia. "It is not surprising that the country's consumer banking sector has drawn the attention of foreign banks, and our study clearly reveals the extent of their commitment to this market. As one of the earliest foreign companies to enter the payments market in China, we have direct experience of the challenges facing new entrants."

Lee added, "This important study provides valuable insight into the attitudes and experiences of bankers and merchants from across the world as they address the rapidly growing Chinese market. Our global payments expertise, coupled with our local presence in China and across Asia, positions us well to provide the infrastructure, operations, licensing and outsourcing support needed by organisations looking to develop their cards and payments business in China."