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PayPal Entering China Market by Local Acquisition

The People’s Bank of China (PoBC) announced they are nit against PayPal’s desire to acquire a 70% equity state in GoPay (Guofubao Information Technology Co. [GoPay], Ltd.). With this step, Paypal is becoming the first international entity that will be offering its online payment solutions in China.

GoPay mostly works as a provider of a number of payment products for various industries including cross-border commerce, aviation, tourism, etc.

According to the information revealed by the company, PayPal bought the major stake through the Shanghai-based subsidiary Yinbaobao Information Technology (Shanghai) Co., Ltd.

The companies did not disclose the details of the terms that were approved to make a deal.

Be it as it may, it’s interesting that PayPal is coming to China at the same time as we are witnessing larger tractions between the U.S. and China. Let’s not forget that Washington said it is considering curbing some U.S. investments in China and even delisting Chinese companies from the US stock markets.

Even though China’s payments market today is governed by local players, among them we can mention eWallet companies such as AliPay or, for example, WeChat Pay on the mobile side, there are still ways for it to grow. And that would be pretty good for PayPal’s sake.

When talking about mobile payments, according to the report from Frost & Sullivan., the market has good chances to grow 21.8% from 2017 to $96.73 trillion in 2023. Most of the rise will be guided by larger demand for e-commerce. The growth in cross-border transactions, especially in sectors like e-commerce, travel and overseas education, was also observed. Those sectors grew to huge $6.66 trillion in 2016.

Also, the report mentioned the total number of active mobile payment customers that is expected to grow to 956 million by 2023. Just for the comparison, in 2017 there were 562 million.

In 2018, China’s central bank said it would be more liberal considering the foreign payment companies.

U.S. financial companies are trying to get their entrance to China for a long time now. The first US card company that gained China’s permission to set up card clearing services on its territory was American Express. Mastercard is also interested in building a joint venture in this market.

From PayPal, they said the transaction should be closed in Q4 2019 and is “subject to customary closing conditions.”

“We are honored to become the first foreign payment platform to be licensed to provide online payment services in China. 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,” the company’s full statement reads.

PayPal Entering China Market by Local Acquisition

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