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PayPal enters China with 70% stake in GoPay, the Chinese government will control the other 30%

PayPal is the first US payments company to enter China.
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It’s finalized – has now become the first US-based payments company to enter the Chinese digital marketplace after the latest majority acquisition in a China-based payments company “GoPay.”

Generally speaking, US tech companies are prevented from doing business with its citizens; even if they wanted to, the US companies must usually be willing to sacrifice the majority control and transfer IP rights to the Chinese partners.

The tables have now turned though, as PayPal has bought 70% of the stake in “GoPay”, meaning that the US-based payments company is now going to enter the Chinese digital marketplace without giving away its majority stake or IP rights. It is worth noting that 30% of the stake in “GoPay” will be held by a Chinese company that is controlled by the Chinese government itself as part of China’s “Ministry of Commerce.”

In a statement following the acquisition, PayPal wrote:

“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 Chinese have dominated the realm of mobile payments marketplace as the country boasts 817 million internet-connected individuals, out of which more than 90 percent were connected through mobile phones alone. At such a juncture, acquisition such as this may indicate a bright future for the US-based payments firm but may raise eyebrows as a rift between the US and China has grown in recent times.

As of now, Pay and Alipay are the top mobile payments services in China, enjoying a user base of 600 million and 400 million respectively. PayPal and Pay are the third and fourth-largest mobile payment services with 210 million and 87 million users respectively.

With the global mobile payment market is forecasted to reach up to $253 trillion by 2025, the Chinese market is currently the torchbearer of growth in terms of mobile payments. Online shopping is perfectly streamlined in China with nearly 40% of the digital payment users of China carrying less than $15 in cash.

Much of the rapid growth in mobile payments in China was triggered by the country’s state-sponsored “internet plus” policy which aims to dominate the technology market while placing maximum domestic control in the hands of its citizens.

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