Global payment solutions provider PayPal is in the midst of obtaining payment license from Chinese authorities to grab a share of the 145 million online shoppers in the country, with US$ 121 billion worth in annual e-commerce activities. If approved, they will be the first foreign player in the online payments space, which will make them a competitor with local giant player Alibaba’s Alipay.
Even though they have been offering “cross-border transactions” for users in China, this license will allow them to handle domestic payments as well. Obviously they will bring in their “PayPal Here” service to this market, accompanying similar offers in Australia, Canada, Hongkong and the U.S. The card-swiping dongle will turn PayPal into a mobile wallet service, which can be used on Point-Of-Sale (PoS) transactions with iPhone and Android devices.
If PayPal manages to enter the Chinese market — one of the world’s fastest growing economies — the company could see a significant increase in its total payments volume, which would directly impact its net revenue from online payments.
Recent forecast from consulting firm Boston Consulting Group (BCG) indicates that the number of online buyers will increase dramatically to 320 million by 2015. In the same year, it is predicted that e-commerce will account for 7.4% of China’s total retail transactions, up from 3.3% in 2011. China is the world’s second biggest market with regard to online purchasing activity, after the U.S, with 175 million users according to Barclays Capital. Entry into the domestic market will boost Paypal’s payment volume, as well as their net revenue, too.
Alipay, which currently dominates China’s internet payment market with 47% share, had been awarded the license from Central Bank last year. Tencent Holdings Ltd’s TenPay, ranking second, has a market share of 21%, according to Analysys International. The market will be tough, as Analysis analyst Zhang Meng says “the competition will be fierce. The domestic companies have already established themselves.”