Global online payments operator PayPal has now become the first foreign firm to acquire a license to provide digital financial services in China. The company has managed to beat other multinational payments and credit services providers in finding a way to enter the world's second-largest economy.
China's central bank announced on Monday that it has approved PayPal's acquisition of a 70 percent stake in the Chinese digital payments firm GoPay. The company provides services that are very similar to PayPal but is geared more towards Chinese consumers. The approval essentially means that PayPal will be able to provide its own services in China once the deal is finally completed.
The acquisition deal is expected to be completed by the end of this year. Terms of the deal have unfortunately not been fully disclosed, but PayPal is expected to reveal everything once the transaction has been completed.
China's growing middle class and the increase in popularity of online financial services has made the country a very lucrative destination for global Fintech service providers. However, the process of applying for a license to operate online payment networks in the country is painfully slow.
PayPal managed to circumvent the problem by taking on majority ownership of GoPay. This essentially grants it the Chinese firm's own license to provide online financial services to Chinese consumers.
PayPal CEO Dan Schulman mentioned in a statement posted online that his company is looking forward to the partnership with one of China's leading financial platforms. The company hopes to provide a more comprehensive set of payment solutions to both individuals and businesses throughout China in the coming years.
The deal opens up the door for PayPal to take advantage of China's growing demand for digital payment processing. The industry is estimated to have a value of trillions of dollars and PayPal is aiming to tap into that market once it completes the deal.
Despite its size, PayPal will likely have to work to get a share of the market given the already stiff domestic competition. In the last few years, local tech giants such as Alibaba and Tencent have dominated the market.
Alibaba provides online payment processing through its subsidiary AliPay, while Tencent recently launched WeChat Pay. The systems that both companies provide allow consumers to make payments using only their mobile phones. This is a much more convenient approach as opposed to setting up an entire infrastructure for traditional credit card payments. As of last year, more than 8 million stores and outlets across China have started to accept payments using WeChat Pay and AliPay.
