Getting a license to open a business in China's massive digital market may not be a walk in the park for many Western companies, but Paypal has somehow managed to secure one without any hitch.
The Chinese central bank has given the green light for PayPal (PYPL) to provide digital payment services inside its territory after the US payments giant acquired a majority share in GoPay, China's own version of the payments service.
The approval gives Paypal a 70 percent equity interest in GoPay, the two parties disclosed late Monday, and makes Paypal the first foreign company authorized to provide digital payment services in the country.
Specific details with regards the terms of the agreement, which is seen to be finalized before the year ends, have not been announced, a representative from Paypal said.
GoPay is an emerging Chinese payments outfit that offers the same services of its American counterpart: it allows merchants to process non-credit card payments right from their websites.
For many years, credit card and other payment services firms have tried their luck to penetrate the bustling Chinese digital market - and the second biggest economy in the world - where the rising number of middle-class population means a lucrative area of customers searching for money more trans, credit card and loan services.
China's trade ministers have welcomed the entry of Western companies to apply for permits to operate in its own soil, but the approval process takes many years. By taking a majority stake of GoPay, Paypal has the opportunity to establish a strong foothold away from home.
According to Paypal chief executive officer Dan Schulman, the company looks forward to collaborating with China's commercial and tech companies to provide "a more comprehensive set of payment solutions to consumers in China and globally."
The deal allows PayPal to easily tap into China's enormous digital payments marketplace - projected to be worth trillions of dollars. But it will not be easy. China's own Alibaba's AliPay and Tencent's WeChat Pay have been the major forces in this arena.
Over 8 million Chinese brick and mortar stores used AliPay since 2018. The rigors of acquiring a license have been a huge trouble for American entities to make its presence in China while benefiting the country's own businesses.
Meanwhile, Paypal settled at $103.58 in its latest trading, marking a 1.37 percent increase from its recent session. This upward move beat the S&P 500's 0.50 percent gain on the day. Paypal will be looking to show more strength as the company prepares for its upcoming earnings report.
