CHINA – U.S. digital money transfer platform PayPal Holdings Inc is set to expand into China mobile payments market after it obtained an approval from China Central Bank to buy a majority stake in a domestic payments firm, Go Pay Information Technology.
The move would make PayPal the first foreign mobile payments firm to enter China which is billed as the world’s second largest market after the United States.
The terms of the deal, which is expected to close by the end of 2019, have not been disclosed, a PayPal spokesperson said.
GoPay is a small Chinese payments provider that functions similarly to PayPal — it allows merchants to accept non-credit card payments straight from their websites.
“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,” PayPal CEO Dan Schulman said in a statement on LinkedIn.
The deal which will see PayPal have a 70% controlling stake in GoPay, opens the door for PayPal to process digital transactions in China — which are estimated to total in the trillions.
The mobile payments is currently dominated by Chinese digital payments services Alibaba (BABA)’s AliPay and Tencent (TCEHY)’s WeChat Pay.
AliPay for example, has more than 8 million brick-and-mortar stores in China accepting its payment solutions as of last year.
The financial regulator had announced plans to open up the mobile payment services to foreign firms.
However, the licensing requirements have made it difficult for American companies to operate in the country, while benefiting Chinese companies.
The American Express Company is the only other American company that has successfully made inroads in the market.
Last year, American Express received preliminary approval from the People’s Bank of China to start building out a domestic clearance and settlement network through its joint venture with Chinese partner LianLian group.
The preliminary approval it received last year will allow it to build out its own network to process payments on AmEx branded cards.
Mastercard and Visa have also tried to offer such services in China but have not yet received approval from the necessary authorities.