PayPal Investment Positions It for China Entry

The company will become the first foreign platform to offer digital payment services in China by acquiring 70% of a domestic provider.
Matthew HellerOctober 1, 2019

PayPal has broken through a digital payments barrier as the Chinese government approved its acquisition of 70 percent of a domestic payments provider.

PayPal’s investment in GoPay makes it the first foreign payment platform to provide online payment services in China, a market currently dominated by Alibaba’s AliPay and Tencent WeChat Pay.

By acquiring majority ownership of GoPay, PayPal gains access to the Chinese firm’s license to process online payments. China opened the door to foreign firms to start applying for licenses two years ago but it had yet to approved a license.

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“We look forward to partnering with China’s financial institutions and technology platforms, providing a more comprehensive set of payment solutions to businesses and consumers, both in China and globally,” PayPal CEO Dan Schulman said in a statement.

As CNN reports, “American payment and credit card companies have for years been trying to break into the world’s second largest economy, where the growing middle class means a growing market of consumers seeking lending, credit card and money transfer services.”

But only American Express had made any headway, receiving preliminary approval from the People’s Bank of China to start building out a domestic clearance and settlement network through its joint venture with Chinese partner LianLian Group.

China’s mobile payments market alone is expected to grow to $96.73 trillion in 2023, driven partly by increasing demand for e-commerce, according to a report from Frost & Sullivan. Cross-border transactions reached $6.66 trillion in 2016 amid growth in such sectors as e-commerce, travel and overseas education.

“It may not be an easy market to break into,” CNN said, noting that AliPay and WeChat Pay have made it “easy for merchants to use their services and accept payments from mobile phones rather than setting up the infrastructure to accept credit card payments.” As of last year, more than 8 million brick-and-mortar stores in China accepted AliPay.

“China’s domestic payments industry has great opportunities but the obstacles that foreign companies will face are not small,” said Dong Ximiao, a chief analyst at Zhongguancun Internet Finance Institute.