Online payment and money transfer platform, Paypal, becomes the first foreign financial payment platform to process payments made in China after the company has acquired 70% equity state in GoPay (Guofubao Information Technology Co. (GoPay), Ltd.). Similar to Paypal, GoPay has licenses to provide financial services both online and through a mobile app. The company provides a payment option to a wide range of corporate clients in e-commerce, cross-border commerce, aviation tourism, and others.
Paypal has confirmed that the Chinese central bank, the People’s Bank of China has officially approved its application to acquire GoPay. Paypal said that they are “honored” to become the first foreign payment company to have penetrated the elusive Chinese market.
“The People’s Bank of China has approved PayPal Information Technologies Co., Ltd.’s acquisition of a 70% equity interest in Guofubao Information Technology Co. (GoPay), Ltd., a holder of a payment business license in China,” Paypal’s statement reads. “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 company further said that its acquisition of the Chinese company, GoPay, is expected to be completed in the fourth quarter of 2019 and is subject to customary closing conditions.
In a statement made by GuoFubao, PayPal was able to acquire the controlling stake through the Shanghai-based subsidiary, Yinbaobao Information Technology (Shanghai) Co., Ltd. Nonetheless, neither of the parties has disclosed specific terms of the deal.
Guofubao, the company behind GoPay, was formally granted the Internet payment and mobile phone payment service license by the People’s Bank of China in December 2011 and subsequent license grants for financial processing were also granted to the company until 2016.
Amid Paypal’s acquisition, the company said that they would continue conducting businesses in accordance with regulations from the Chinese government.
“[Translated] In the future, Guofubao will, as always, conduct business in accordance with the requirements of various regulatory policies and regulations under the guidance of the regulatory authorities, resolutely implement the requirements of various regulatory work, and legally and compliantly carry out payment services,” said the company in a statement.
The acquisition by Paypal of GoPay comes in the midst of intensifying tension between the United States and China. The trade war between the two economic superpowers put risks on Chinese investments as the Trump administration is now considering curbing some U.S. investments in China.
Nonetheless, the opportunities for Paypal to grow in the massive financial market of China is gigantic. While China’s fintech industry is led by local payment platforms and e-wallets like Alipay and WeChat Pay, the growth seen on the Chinese market also opens up doors for foreign investments like Paypal.
A report from Frost and Sullivan revealed that the market is expected to grow 21.8% from 2017 to $96.73 trillion in 2023 in the mobile payments side alone. According to the firm, the growth in the market is largely driven by the shift of demand towards online commerce. The market has also seen an increase in cross-border transactions, particularly in sectors like e-commerce, travel, and overseas education, which reached $6.66 trillion in 2016.
In the same report, the firm has revealed that the number of individuals who are using mobile payment options will reach 956 million by 2023, up from 562 million in 2017. Because of the foreseeable growth in the mobile payment market, the Chinese central bank has even said last year that they would open up further into encouraging more foreign investments to come in.