PayPal Holdings has taken a 70% stake in GoPay’s parent company for an undisclosed sum, making it the first overseas firm to have an online payments license in China.
According to Yicai Global, California-based PayPal bought the stake in Guofubao Information Technology from HNA Technology Group, it said in a statement yesterday.
The People’s Bank of China, the country’s central bank, gave the deal the green light in late September.
PayPal enters a digital payments market that is dominated by Ant Financial’s Alipay and Tencent Holdings’ WeChat Pay.
But they offer limited services abroad. Chinese consumers could benefit from PayPal’s extensive overseas network of e-commerce merchants and buyers. Set up in 1998, PayPal serves 300 million users in more than 200 countries and regions around the world, supporting online transactions in more than 100 currencies.
“We’re pleased to complete this historic transaction, which enables us to broaden our participation in such a dynamic market,” said Dan Schulman, president and chief executive of PayPal.
“This important step will allow us to be a stronger partner to Chinese financial institutions and technology platforms.”
Haikou-based HNA Group formed GoPay in 2011, but amid the conglomerate’s liquidity crisis last year, GoPay was reported to have misappropriated proceeds from wealth management product to support the group. As a result, the PBOC handed Beijing-based Guofubao a fine of 46 million yuan (US$6.6 million) last August.
Cofortune Information Technology, a unit of the China International Electronic Commerce Center under the Ministry of Commerce, retains 30% of Guofubao’s equity after the PayPal deal.
The news of PayPal’s entry into China comes at a time when there’s increased tension between the US and China, with The White House reportedly now considering curbing some US investments in China amid the trade dispute between the countries.
Though China’s payments market today is led by local players, there’s still plenty of room for it to grow — which would benefit PayPal.
On the mobile payments side alone, the market is expected to grow 21.8%, from 2017 to US$96.73 trillion in 2023, driven partly by increasing demand for e-commerce, a report from Frost & Sullivan found.
The market has also seen an increase in cross-border transactions, particularly in sectors like e-commerce, travel and overseas education. These reached US$6.66 trillion in 2016.
The report additionally said the total number of active mobile payment customers is expected to reach 956 million by 2023, up from 562 million in 2017.
According to CNN, only one other American company has successfully made inroads in the market. Last year, American Express received preliminary approval from the PBOC to start building out a domestic clearance and settlement network through its joint venture with Chinese partner LianLian group.