By Tyler Orton
(Image: Igor Kivritsky, general manager of Vancouver’s HiFi Centre: purchases by “wealthy Chinese clients” have been rising since the company began accepting China UnionPay cards earlier this year | Photo: Rob Kruyt)
When a customer walked into Igor Kivritsky’s audiovisual showroom a few months back, she was intent on buying half a dozen pairs of headphones for her friends in mainland China.
“The cheapest one was $2,000 a pair,” recalled the general manager of the family-owned HiFi Centre on Carrall Street, just a block from Vancouver’s Chinatown gates.
The customer walked away from the store only after spending $20,000.
“Her purse cost 20 grand, so these weren’t real big numbers for her,” Kivritsky said, adding that business from “wealthy Chinese clients” has been ticking upward since HiFi Centre began accepting China UnionPay cards in the spring.
UnionPay is China’s largest cardholder group. Only Visa processes more transactions annually worldwide.
In November, Toronto-based Moneris Solutions became the first Canadian credit and debit processor to accept cards issued by UnionPay. Customers with UnionPay cards no longer pay fees to access money in bank accounts held in China if a Canadian merchant accepts the card.
Upon launch, Moneris had only a few hundred merchants signed up to accept UnionPay.
But the company is on track to have 50,000 UnionPay acceptance points across the country by the end of 2016, according to chief sales and relationship officer Jeff Guthrie.
Although Guthrie said he couldn’t release exact figures, Vancouver and Toronto have been leading the growth across Canada.
And Metro Vancouver itself experienced 65% growth in June.
“[That is] not a surprise to us,” he told Business in Vancouver, adding Moneris specifically targeted vendors in downtown Vancouver, Whistler and Richmond when it launched UnionPay in Canada.
“People are really interested in the brand.”
Merchants displaying the cardholder group’s logo on their storefronts pay fees slightly less than those of typical card transactions.
The other upside, according to Kivritsky, is that customers who may have been hesitant to make a big purchase are now spending more on big-ticket store items.
Meanwhile, Guthrie said in-store acceptance rates have gone up by 50% a month since UnionPay entered the Canadian market.
Travel, entertainment and luxury goods have been the primary drivers behind this growth.
Those types of purchases are consistent with what UnionPay told Moneris to expect, according to Guthrie.
An April report from Europe’s Global Blue revealed luxury spending by Chinese tourists was up 67% in the first quarter on that continent compared with 32% during the fourth quarter of 2014.
Comparable data isn’t available for Canada, but BIV data compiled from Statistics Canada shows the number of mainland tourists visiting the country is up considerably this year.
Visitors from mainland China grew 18% from 110,000 during the first quarter of 2014 to 130,000 in the first quarter of 2015.
And according to data from Moneris, those tourists have been spending big. The average debit transaction size in Canada is $90 to $100, while the average UnionPay transaction size in Canada is $2,400.
Even mid-August’s surprising devaluation of the yuan, which has fallen nearly 4% against the U.S. dollar, doesn’t appear as if it will slow down Chinese consumer spending in Canada.
“It still has seen one of the smallest declines against the [U.S. dollar] in 2015,” BMO chief economist Douglas Porter wrote in an August 14 note to investors.
“Just last week, it hit its highest level against the Canadian dollar in 21 years. In other words, the [yuan] is still a very strong currency, even with this week’s moderate devaluation.”
