The Monetary Authority of Macao announced on Friday it would implement a real time monitoring system for payments made via China UnionPay Co Ltd bank cards. Deutsche Bank Securities Inc said in a note the announcement can be read as a negative for the city’s gaming industry.
The monetary authority (pictured) – Macau’s de facto central bank – outlined in a statement that “the initial phase of the real-time monitoring system will be implemented on high-risk merchants near casinos, most of which are jewellery and watches merchants.”
It added: “The real time monitoring system will be extended to other high-risk merchants selling high value products in the second phase [sic].”
The announcement stated that, “in view of the comparatively high turnover incurred, China UnionPay card-related transaction[s] will be focused [on] at the initial stage.”
The authority did not mention a date for the launch of the system. It said that it had organised on Friday an explanatory session for relevant parties.
Gaming industry analysts have said UnionPay cards are regularly used by mainland China casino players coming to Macau, in order to circumvent the mainland’s strict currency-export controls. But those analysts have also said that such activity – when done via the city’s pawnshops – had until now effectively been tolerated by the authorities.
Mainland visitors are only allowed to take a daily limit of 20,000 yuan (US$3,109) out of China in cash, but gamblers are said to get around this by purchasing items from one of Macau’s pawnshops or jewellery stores using UnionPay and then returning the goods for a cash refund.
The real time monitoring system “is designed with the aim to verify the genuine relationship between card holder and the bank card in the process of acquiring goods or services in order to protect the lawful rights and interests of cardholders, merchants and banks,” the statement from the Monetary Authority of Macao stated. The body added that the new system would help Macau to comply with international rules and guidelines on tackling illegal cross-border financial activities and money laundering.
The announcement by the Monetary Authority came shortly after media reports stating that UnionPay had issued a memo ordering a clampdown on illegally modified point of sale (POS) units. There have been cases of POS devices registered for use only on the mainland being rigged to conduct transactions in Macau. Such business is recorded in the mainland’s UnionPay network as domestic, thus avoiding higher fees applicable for cross-border payments.
Deutsche Bank’s analysts Carlo Santarelli and Danny Valoy stated in a note on Friday that the monetary authority’s statement “leaves little in the way of ambiguity and, in our view, is likely to read negatively” for Macau’s casino sector.
Mr Santarelli and Mr Valoy added: “We believe [casino] mass market trends, specifically the premium mass segment, which has been soft, will draw considerably more scrutiny in the coming months/quarters as investors look to see an impact/fallout from the presumably changing way of doing business in Macau.”
According to a recent survey from UBS Securities Asia Ltd to 510 mainland Chinese gamblers from Macau’s mass segment, about 20 percent of respondents said they used UnionPay cards to get cash from ATM machines in Macau, but none said they used UnionPay at jewellery shops as a source of funding for gaming.
The survey showed any further restrictions on UnionPay usage were likely to have a negative impact on spending intentions. Close to 70 percent of the respondents stated they believed more restrictions would reduce their gaming spending in Macau in some way.
In September, mainland Chinese media reported that China’s State Administration for Foreign Exchange – also known as SAFE – announced new annual limits on ATMs made outside mainland China using UnionPay-enabled bank cards.
According to the reports, with effect from January 1, 2016, each UnionPay-enabled card will have a new, annual, cash withdrawal limit at overseas ATMs of RMB100,000. Prior to that, with effect from October 1, 2015 until December 31, 2015 there is a RMB50,000-per-card ATM cash withdrawal limit, it was additionally reported.
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”I would expect that there might be some clearly-defined criteria … and I’m supportive of a more clearly-defined roadmap for the [gaming] industry”
Co-chairperson and executive director of Macau casino operator MGM China