Can PayPal challenge dominance of local players in China?

While many US companies have been doing business in China for decades, it was only early this year that the Chinese government opened its market for local payment services to foreign firms.

PayPal, one of the world’s leading money transfer platforms, announced on Monday the acquisition of a Chinese local payment service provider, making it the first foreign payment platform to provide online payment services in the country.

The People’s Bank of China has approved the US firm’s acquisition of a 70 percent equity stake in GoPay (Guofubao Information Technology).

GoPay, which has licenses for online and mobile transactions, mainly provides payment services for various industries such including e-commerce, cross-border commerce and aviation tourism.

According to a statement from GoPay, PayPal acquired the controlling stake through Shanghai-based subsidiary Yinbaobao Information Technology (Shanghai) Co. Ltd. The terms of the deal were not disclosed.

While the Trump administration wants American firms to scale back their investments in China amid escalating trade tensions between the two countries, the PayPal deal shows that the private sector will not be intimidated by political pressure to pursue business growth wherever there are opportunities available.

That said, PayPal may not find China business a walk in the park. For starters, two local players — Alipay and WeChat Pay — have been dominating the market over the past decade. China also considers payment services as a sensitive sector that needs to be protected from foreign competition.

Nonetheless, the deal indicates that the Chinese government still welcomes US investment. Also, though local China’s payments market today is led by local players, there’s still plenty of room for it to grow.

The market for mobile payments is expected to grow 21.8 percent from 2017 to US$96.73 trillion in 2023, driven partly by soaring demand for e-commerce, according to a report from Frost & Sullivan.

The market has also seen an increase in cross-border transactions, particularly in e-commerce, travel and overseas education. These transactions reached US$6.66 trillion in 2016. The number of…

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