PayPal is first foreign company to nab Chinese payments licence
PayPal has become the first foreign company to gain a Chinese payments licence following the approval of its acquisition of Guofubao, a small online payments firm based in China.
PayPal is set to grab a 70% stake in the Chinese firm, also known as GoPay, for an undisclosed figure. The deal will see it gain a Chinese payments licence by proxy, something which other major companies have been seeking for some time.
Through Guofubao, PayPal will be able to offer online, mobile and cross-border renminbi payments, and will be able to issue debit cards. PayPal will make the acquisition through a subsidiary in Shanghai.
The People’s Bank of China (PBOC), China’s central bank, has previously pledged to give equal treatment to foreign companies seeking to ply their trade within the country. The central bank must decide on applications for a licence within 90 days, according to its own rules. Despite this, companies like Visa and Mastercard have been waiting for a licence for years.
According to Financial Times sources, the regulator is yet to formally recognise the applications from either card scheme. Issues over market openness have been a sticking point in ongoing trade talks between China and the United States.
PBOC is the largest shareholder in China UnionPay, the world’s largest card scheme and one which holds sway on the Chinese market. In 2018 China UnionPay had one billion more cards in circulation than Mastercard.
The Chinese payments market is valued at around $65 trillion, while banking institutions handled around 60 billion transactions in 2018 worth $38 trillion. The mobile payments sphere is dominated by two major platforms: WeChat Pay and Alipay. Also facing PayPal is China’s payments fee rate, which at 0.5% is lower than the international rate of 1.5-2%.