PayPal Holdings announced that it can do business in China after buying a controlling stake in a domestic payments firm.
The deal would make PayPal the first foreign firm to enter China’s payment services market.
“The People’s Bank of China has approved PayPal Information Technologies Co., Ltd.’s acquisition of a 70 percent equity interest in Guofubao Information Technology Co. (GoPay), Ltd., a holder of a payment business license in China,” Dan Schulman, president and CEO of PayPal, said in a statement. “We are honored to become the first foreign payment platform to be licensed to provide online payment services in China. We look forward to partnering with China’s financial institutions and technology platforms, providing a more comprehensive set of payment solutions to businesses and consumers, both in China and globally. The transaction is expected to close in the fourth quarter of 2019 and is subject to customary closing conditions.”
Gopay has licenses for mobile, online and cross-border renminbi payment services. According to Reuters, PayPal will make the acquisition through a subsidiary in Shanghai. No financial terms were disclosed.
This plan has reportedly been in the works for a while. During trade talks, the United States has been trying to convince China to allow it more market access, and the central bank said that it was going to allow for “equal treatment” for domestic and foreign groups alike. Among the companies that have been trying since 2017 to get access are Visa and Mastercard.
This new deal will allow PayPal to offer a variety of services, including the issuing of debit cards and cross-border renminbi payments, both online and mobile. The company will now be in direct competition with two major Chinese companies: Tencent and Alibaba.
“China’s domestic payments industry has great opportunities but the obstacles that foreign companies will face are not small,” said Dong Ximiao, a chief analyst at Zhongguancun Internet Finance Institute.