PayPal further expands in China

For many years, the China payments market was an oligopoly with state-owned UnionPay dominating the cards segment while Alipay and Tenpay together held about 90% of mobile payments. These three companies are still far bigger than any of their competitors, but Beijing has in recent years gradually begun improving market access for foreign firms amid a challenging economic environment. It is against this backdrop that PayPal has been steadily ratcheting up its presence in China, most recently with the launch of a service – PayPal Complete Payments – that allows Chinese merchants to accept foreign credit cards and mobile payments.

PayPal’s China business recorded double-digit growth in the past year, Hannah Qiu, senior vice-president and China CEO of PayPal, said on Oct. 3. “This is impressive growth considering the pressure and challenges facing the global and Chinese economy,” Qiu said.

In a press release, PayPal said that as China’s payment industry and cross-border e-commerce continue to expand rapidly, the company “will keep working with its Chinese partners to explore, innovate, and support Chinese businesses in achieving greater success on the global stage.”

 PayPal has had a presence in China for about two decades, but only in the past few years has it been able to take significant steps to grow its business in the world’s second largest economy. The U.S. digital payments giant was the first foreign company to receive approval to provide online payment services in China. Further, in 2023 its wholly-owned China subsidiary won approval from the People’s Bank of China to almost double its registered capital to RMB 4.5 billion (US$666 million), which will be the largest capital base of any non-bank payment provider in China. This is significant because it is far more than Alipay and Tenpay, which are both estimated to have less than RMB 2 billion.

PayPal’s persistence may go to show that in China, late is truly better than never. After years of being shut out of the market, it finally was finally able to enter following its acquisition of 70% of Beijing-based Gopay Information Technology in early 2019 and the rest of the company two years later. In May 2022, Gopay was officially renamed PayPal Payments. The Chinese PayPal subsidiary has secured several key licenses, including those for online and mobile transactions.

When it comes to cross-border payments, Alipay remains formidable given its e-commerce ecosystem. However, PayPal now has money to spend to compete. The question is whether PayPal can offer lower fees than Alipay. We do not recommend holding one’s breath for that though given PayPal’s reputation for high fees.