Given that the largest foreign credit card companies such as Visa, American Express and Mastercard are still barred from issuing cards, SCB's pioneering efforts could well leave it placed to obtain first-mover advantage, say observers.
So far, credit cards have only been issued in limited numbers by the country's state-owned commercial banks. Scarcity is partly a result of the routine credit problems which plague Chinese financial institutions. To avoid similar difficulties, SCB says it will require strict levels of financial disclosure from its applicants.
Third party providers of consumer loans for cars and houses will also be invited to join the system – for a fee - using the computerized credit profiles of the borrowers to decide on the structure and terms of their loans.
The company will be in the form of a joint venture, of which 51% will be owned by the Shaanxi Trust and Investment Corporation, while the rest will be sold to foreign investors. The company, in its final form, will have a registered capital of $40 million.
Shaanxi Trust and Investment Corporation will provide the cash in the form of loans to the successful credit card applicants.
A company statement said the company had recruited professional executives in the US to take up positions in China.
The SCB credit card network provider will be Singlee Technology, a listed company in Hong Kong.
Credit throughout China's financial system is becoming increasingly professionalized, along with a recognition of the importance of accurate financial information, a company statement said.
Vhaichai Chalamish, a 35-year old entrepreneur of Israeli background, previously the founder of US-based Digicom Matsu Industries Inc, will be heading up the new company as president.
Chalamish has spent many years in China and is married to a Chinese national.
In a phone interview from Los Angeles, he said the company would be issuing its first credit cards by July 15 this year. Around 260 merchants will be in a position to accept the card by that time, although he hopes the total will swell to 65,000 nationwide by 2013.
When asked why his company had been given the go-ahead, while the big US and European players are still frozen out, he puts it down to the extensive local content.
"From the mainland point view, there is nothing to fear from us. All the company operations will be localized and internalized on the mainland," he comments.
Chalamish plans to offer nine different types of credit cards and nine different credit lines, ranging from RMB 500 ($60) to the Platinum Plus at RMB 50,000.
"We won't be looking at how many cars or houses an applicant has. He will have to provide us with verifiable financial information, such as proof of salary for the past three months, before we provide him with the credit card. As he provides us with more information and builds up his credit history, he can move up the ladder towards obtaining the Platinum Plus card," says Chalamish.
The information would be verified by a wide range of strategic partners, including the Public Security Bureau.
Chalamish holds a portion of the company, but says he is looking for other additional investors to contribute to the company's planned $40 million registered capital.
He says these investors have already been identified and that hard negotiations are taking place.
However, all necessary permits, including the Chinese Business Registration Certificate, The Chinese Tax Bureau Certificate and the People's Bank of China's Certificate approving the company's scope have already been obtained, the company says.
