Tussle for China’s E-Wallet

By Zhang Shasha

The mobile Internet has changed the everyday life of the Chinese， with the revolution in payment methods being a major highlight. QR code-based solutions have replaced cash payments in most consumption scenarios and facilitated transactions beyond borders and imagination. Third-party payment service providers like Alipay and WeChat Pay have become a new industry with more new players joining in.

Recently， the sector welcomed a new star： U.S. giant PayPal. PayPal is the first foreign digital payment platform licensed to provide services in China， a milestone event.

The stage was set for the American companys entry in September 2019， when the Chinese central bank approved PayPals acquisition of 70-percent equity in GoPay， a Beijing-based third party payment service provider， and the deal was wrapped up in December that year.

Dan Schulman， President and CEO of PayPal， called it an “important step” for the company to participate in a “dynamic market” in a press release. On December 31， 2020， PayPal acquired the remaining 30-percent shares in GoPay.

Industry insiders think PayPals full ownership of the Chinese company heralds stable advancement of Chinas opening up in the financial sector. Besides， it will bring in more possibilities vis-à-vis the cross-border payment market in the future.

Opening the door

PayPals advent in China goes back to 2004， when it established a wholly owned subsidiary in Shanghai， recognizing the huge potential of the Chinese market. However， it was only in 2018 that PayPal got access to the business after the government removed restrictions on foreign investment in payment institutions and clarified rules and regulations.

The policy， aimed at encouraging foreign companies to participate in the payment market and grow through fair competition while preventing monopoly， laid a solid foundation for foreign enterprises like PayPal to enter the market.

According to the China Internet Network Information Center， by June 2020， 85.7 percent of the Internet population in China， or 805 million， were making online payments. Mobile payment users totaled 802 million， accounting for 86 percent of mobile Internet users. U.S. consulting firm Frost and Sullivan predicts that the countrys online payment market would be worth $96.73 trillion by 2023.

This huge market potential led to PayPals acquisition of GoPay. “The move will allow us to be a stronger partner to Chinese financial institutions and technology platforms. We look forward to contributing to the growth of Chinas e-commerce and payment ecosystem，” Schulman said.

Last year， American Express became the first foreign company to be allowed to process yuandenominated credit card transactions both in China and abroad. Instead of competing headon with its Chinese counterparts like Alipay and WeChat Pay， PayPal will possibly focus on the opportunities that will emerge after international credit card institutions enter the Chinese market.

Its services are likely to include payment services for foreign users spending in China and for domestic individuals and companies crossborder payments.

“Relying on cross-border tourism and ecommerce， its possible for PayPal to connect the international payment network with Chinas payment ecological system， which will enable it to develop closer business ties with global credit card organizations，” Wang Pengbo， a senior analyst in the payment industry， told new media platform Time Finance.

Dong Ximiaos suggestion is that while allowing foreign investment， Chinese credit card institutions and cross-border payment service providers should be encouraged to go abroad and strengthen their international service capability.

Chinese companies are already thinking along those lines. Bill Deng， Chief Executive of XTransfer， a Shanghai-based payment platform that facilitates cross-border payments for Chinese traders， told Reuters， “We see ourselves as Chinas PayPal in cross-border businesses.” BR