The financial and payment platform market in China has been targeted by US giants for a long time but the stringent norms made it difficult for the latter to venture in that space. Last year, China’s central bank announced that “it would open up further to foreign payment companies”, thereby paving the road for US firms to make a foray in the communist country’s market.
Last November, American Express became the first US card platform to provide card-clearing services in China. This business initiative spread positive vibes in the process. Now, PayPal is all set to enter the market after acquiring a majority stake in GoPay. Will PayPal be able to establish a strong foothold and succeed as a trader in the region?
PayPal to Enter China in Q419
On Sep 30, China's central bank finally approved PayPal Holdings, Inc.’s PYPL appeal to acquire 70% stake in China’s GoPay (Guofubao Information Technology Co. [GoPay], Ltd.) for an undisclosed deal value. This will make PayPal the first foreign company to make inroads into the digital payment service market in China.
The digital payment market in China had only three players, namely Alibaba Group Holding Limited’s BABA Alipay, Tencent Holdings Limited’s TCEHY WeChat Pay and GoPay. While both Alipay and WeChat generally engage in intra-country money transfer and e-wallet service, GoPay provides payment for industrial products, e-commerce, cross-border trade, aviation tourism et al.
This is a big step amid the ongoing Sino-US trade rift as PayPal can now penetrate a totally unadulterated market with a huge scope for expansion. US credit card companies have been continuously attempting to enter the market in China but recently the latter opened doors to the players though at a slower pace.
The restriction on the US entities to enter the payment arena in China has been strong, making the former cough up a lot for fulfilling the licensing requirements and this has for long benefited the Chinese firms.
The biggest example of the above is American Express Company AXP, which commonly carries out transactions through its own platform. In China, AmEx has to make payment via the state-controlled China Union Pay to process transactions. Fortunately, per the latest preliminary approval in November 2018, the player has been allowed to process payments on AmEx branded cards.
Other players like Mastercard Incorporated MA and Visa Inc. V are trying hard to collaborate with domestic Chinese companies to tap the well-guarded uncharted market.
Chance for Success
Per a Frost & Sullivan research report, the mobile payment market is expected to grow 21.8% in 2023 compared with 2017, influenced and driven by the rise in e-commerce. In fact, the aforementioned report also states that active mobile payment customers’ number will shoot up to 956 million in 2023 from 562 million in 2017.
As China’s central bank turns generous in allowing US payment platforms to enter the market, PayPal has hit the bull’s eye and will surely succeed. A push in the online shopping will further boost the company’s expansion.
PayPal will be the lone player in cross-border transaction in China and with consumers having access to several online stores worldwide. This will help it winning more clients as consumers will be able to purchase from online across the globe.
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