PayPal Plans to Offer Domestic Payments for China, India Customers

PayPal is making a big push for the world’s biggest Internet-using populations, with plans to open domestic payment services in China and India. But, with established companies servicing e-commerce customers in the region, PayPal would have to face some market and regulatory obstacles.

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PayPal is already offering Internet users in China and India the means to pay for overseas purchases, although the service is yet to be available for domestic payments. PayPal has plans to offer domestic payments in China, PC World reports. “We are currently applying for a domestic payment license in China and are intending to do the same in India in the future,” said Dickson Seow, spekaing for PayPal. However, there is no confirmation yet when PayPal will be granted these regulatory approvals.

It will not be an easy ride, though, since the eBay subsidiary will have to face both tough competition from established players in the market, as well as some legal hurdles. Alibaba-owned AliPay already has a 46.9% share of China’s online third-party payment market, according to Analysis International. This sector consists of non-banking establishments that offer payment systems. Alibaba actually had a partnership with eBay for customer-to-customer payments via AliExpress, although this relationship ceased in August 2011, due to PayPal’s plans for “new initiatives, products and services” in the region.

“[T]he competition will be fierce,” said Analysis analyst Zhang Meng, adding that “domestic companies have already established themselves.”

Another potential roadblock that PayPal will have to face involves licensing restrictions. The Chinese government requires all online payment services run by non-financial institutions to be Chinese-owned. As such, Alibaba — partly owned by Yahoo! and Japanese telecommunications company Softbank — needed to spin off AliPay as a separate entity. eBay might have to undertake the same strategy if it wants to establish a domestic PayPal payment service in China.

China has 193 million e-commerce users, according to the China Internet Network Information Center. As of 4Q 2011, the country’s third-party payment services industry reached 738.6 billion yuan (US$ 117 billion), which underscores the potential for this market.

Meanwhile, India has about 17 million e-commerce users as of 2011, according to Juxt New Age Marketing Research, although this is expected to grow in the next four years.