PayPal in China

PayPal Takes 100% Ownership in Chinese Payment Processor GoPay – How It May Benefit US Online Merchants

PayPal has become the first foreign third-party payment processor to take a 100% stake in a Chinese payments firm, following its acquisition of the remaining shares of GoPay. The US-based payments company initially entered the Chinese market in 2019 by acquiring a 70 percent interested in GoPay.

According to Chinese media reports this week, Cofortune Information Technology Co. gave up the remaining 30 percent stake in GoPay, making PayPal Information Technology (Shanghai) the sole owner of GoPay.

In 2018, China’s central bank opened up the domestic payments market to foreign companies to promote competition in the retail payments industry. Foreign firms would need to set up a local business and apply for a payment license through the People’s Bank of China (PBOC). PayPal chose to go the acquisition route, which was approved by the PBOC.

PayPal’s GoPay Competes For Opportunities in China’s Payments Market

With Alipay and WeChat Pay dominating China’s mobile payments sector, PayPal has a lot of work to do finding domestic market niches with its GoPay subsidiary.

Tencent’s WeChat Pay and Ant Group’s Alipay together account for a market-dominating 94% of the Chinese mobile payment market in 2019, leaving very little room for GoPay. China has the highest adaption of mobile payments globally among domestic mobile users, especially following the COVID pandemic. It’s a very mature market that would require a lot of investment in marketing and innovation to grow market share. However, the Chinese consumer market is poised to overtake the US, so even a little slice could still be a profitable business for GoPay.

Also, the recent spat between Chinese regulators and the Ant Group may open some opportunities as well. With the Chinese government demanding the Ant Group provide more personal customer data, a move that Ant Group has resisted so far, it may make some Chinese consumers look at other options. But how long would it be before the same pressure is placed on GoPay?

The real benefit for PayPal with GoPay in China could be trying to grow its business in cross-border online commerce for Chinese buyers. While Alipay has agreements with a number of foreign payment processors, including First Data in the US, PayPal is the dominant online payment platform in the US.

Potential Opportunities For US Online Merchants and Sellers?

When PayPal entered the Chinese market, PayPal CEO Dan Schulman said, “This important step will allow us to be a stronger partner to Chinese financial institutions and technology platforms. We look forward to contributing to the growth of China’s ecommerce and payments ecosystem.”

The company provided little detailed information on its interests in China beyond what Schulman summarized in his quote. But it would seem that building a financial bridge between China and the US with GoPay may make it easier for Chinese online shoppers to purchase from US sellers.

Strengthening this argument, a few months ago, PayPal collaborated with the online commerce platform BigCommerce on a blog post explaining the opportunities for US sellers with Chinese shoppers.

In the post, PayPal highlighted that the US is one of the top three regions Chinese buyers like to shop when buying from overseas. And it said, “when it comes to online payments made on various websites, they prefer trusted third-party systems.” Globally, PayPal has that trust and it all hints that at least one primary strategy in play with the GoPay acquisition is cross-border commerce. PayPal is fully integrated into GoPay today.

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