PayPal has become the first foreign company to acquire a payments licence in China, after buying a majority stake in a Chinese payments group.
Guofubao (Gopay), a small Chinese online payments company, said on Monday that the central bank had approved PayPal’s acquisition of a 70 per cent stake in the company for an undisclosed sum.
The deal makes PayPal the first foreign company to enter the Chinese payments market after two years of promises from Beijing that its financial services industry would be opened to overseas companies.
The US has been pushing for greater market access as part of its trade talks with China, and the People’s Bank of China last year pledged “equal treatment” for domestic and foreign groups.
Visa and Mastercard are among those foreign companies that have been kept waiting for licence approvals, despite rules in 2017 removing formal obstacles to market access.
According to its own rules, the central bank must decide on applications within 90 days of acknowledgment. The PBoC is the largest shareholder in China UnionPay, which in effect holds a monopoly on renminbi bank-card payments.
PayPal’s acquisition gives it access to Gopay’s various payments licences, which allow it to offer online, mobile and cross-border renminbi payments and to issue debit cards.
PayPal is entering a rapidly growing market for online payments, which is dominated by two tech giants: Tencent, which runs WeChat Pay via its social-messaging platform, and Alibaba, whose payments affiliate Ant Financial owns Alipay.
Third-party online payments in 2018 grew 45 per cent in value to Rmb208tn ($29tn) from the year before, according to central bank figures.
“China’s domestic payments industry has great opportunities but the obstacles that foreign companies will face are not small,” wrote Dong Ximiao, chief analyst at Zhongguancun Internet Finance Institute, in a briefing note.
Mr Dong cited the WeChat-Alipay oligopoly as a significant challenge, as well as the typical domestic payments fee rate of 0.5 per cent, which is lower than the international average of 1.5 to 2 per cent.
PayPal has been expanding into Asia’s booming mobile payments market as growth slows in the US and Europe. It launched in India in late 2017, where it is also playing catch-up against mobile payments services from Alibaba, Walmart, Google, Amazon and Facebook.
Gopay specialises in payments services for companies in ecommerce, cross-border trade and travel.
This article has been changed since publication to amend the English name of Guofubao from NationPay to Gopay.
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