Macau authorities have embarked on a new crackdown on the use of Union Pay cards, removing Union Pay POS terminals from pawnshops inside a number of Cotai integrated resorts.
According to reports, the crackdown has been implemented by the government in conjunction with ICBC (Macau) and the Bank of China (Macau) although it is not yet known whether the removal is permanent or simply part of an exercise to replace older terminals with updated versions offering enhanced KYC technology.
The Cotai properties affected include those operated by Sands China, Galaxy Entertainment Group and Melco Resorts but there are also reports that some IRs on the Macau peninsula have also been affected. Notably, the crackdown has been limited to those shops operating inside large resorts – pawnshops and jewelry stores located on the streets still have their POS terminals and are still offering Union Pay services.
Analysts described the crackdown as unusual given the lack of information provided by authorities.
“When ATMs were ordered to undergo KYC enhancement, the process was well explained and orderly implemented with no real impact to using such devices,” said Bernstein’s Vitaly Umansky, Zhen Gong, Cathy Huang and Kelsey Zhu.
“Consequently, the move is likely broader and trying to make it more difficult for customers to utilize Union Pay in this manner directly in casinos. The shops operating at casino premises have largely been doing so not within the spirit of the law in Macau which does not want such transactions occurring within the casinos.”
In a note seen by IAG, JP Morgan’s DS Kim said most shops “do not seem to have a clear understanding of why or when they’ll get their Union Pay terminals back.”
However, Morgan Stanley’s Praveen Choudhary and Jeremy An referred to a statement by China’s central bank promising to work closely with law enforcement agencies to crack down on irregularities in internet finance, underground banks and illegal foreign exchange trading, adding that Chinese banks were simply upgrading their POS terminals at Macau pawn shops.
Pointing to this statement, Bernstein commented, “The coordinated effort is focused on reducing shady financial transactions that occur with no government oversight or transparency. The recent actions in Macau may be part of the broader China government strategy.
“If the government broadens the effort to reduce outflows through Macau by further limiting Union Pay capabilities and/or going after underground banking channels, the headwind to Macau GGR would be more negatively impacted than currently contemplated.”