PayPal became the first foreign company to acquire payments license in China after buying a majority stake in Guofubao (Gopay), a Chinese payments group.
Guofubao said on Monday, September 30 that the central bank approved Paypal’s acquisition of 70% stakes in the company for an undisclosed sum.
After two years of promises from Beijing, the deal makes Paypal the first foreign company to enter the payment market of China.
Visa and Mastercard were among the foreign companies that were still waiting for China’s approval. According to the rules of the People’s Bank of China, the central bank must decide on applications within 90 days (equivalent to three months) of acknowledgement.
The People’s Bank of China is the largest shareholder in China UnionPay that holds a monopoly on renminbi (RMB) bank-card payments.
“China’s domestic payments industry has great opportunities but the obstacles that foreign companies will face are not small,” Dong Ximiao, chief analyst at Zhongguancun Internet Finance Institute, wrote in a briefing note.
PayPal is entering a rapidly growing market for online payments in which PayPal is dominated by two tech giants namely Tencent and Alibaba.
Mr. Dong also mentioned that the WeChat – Alipay oligopoly as a challenge that is worth of attention as well as the typical domestic payments fee rate of 0.5% that is much lower than the 1.5% to 2% international average.
PayPal has already been expanding into Asia’s mobile payments markets as the growth of Europe and the US went slower. This payment service is also competing with other mobile payments services from Google, Amazon, Walmart, Alibaba, and Facebook as well.
While Guofubao (Gopay) is a payments service that specializes in payments services for companies in e-commerce, in cross-border trade, and in travel.
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