- Move raises eyebrows in cross border payments sector as PayPal acquires GoPay
- It will own 70% of the equity in the firm, and the move has been approved by the Chinese central bank
- “We are honored to become the first foreign payment platform to be licensed to provide online payment services in China”, said PayPal spokesperson
Major international payments service PayPal has announced plans to enter the Chinese market after it acquired a large stake in a local business.
PayPal has purchased a brand known as GoPay, whose full name is Guofubao Information Technology Co., and will use that to enter the market.
GoPay, which is licensed to operate on both standard web devices and on mobile, works in various business to business sectors such as e-commerce.
The move had to be approved by the People’s Bank of China due to the centrally planned nature of China’s economy.
This means that PayPal will now own 70% of the equity in GoPay.
The move was orchestrated using a subsidiary firm called Yinbaobao Information Technology (Shanghai) Co., Ltd.
It also means that PayPal will be the first international organisation to offer internet-based payment services in the major Asian economy.
The move has been interpreted as interesting for a number of reasons by online money transfer market watchers.
First off, technology provision in China tends to be highly developed but also local in nature.
Services such as Alipay are distinctively Chinese, and organisations like YouTube and Facebook do not receive high levels of penetration.
There were also raised eyebrows due to the ongoing political context.
China and the US are locked in a trade dispute, and tariffs on each other’s imported goods and services are in place.
However, it does make sense given that the Chinese central bank has indicated in the recent past that it would give foreign payment companies a chance in the market.
No information was published by the two firms about the value of the transaction.
It is expected that the transaction will settle fully in Q4 of 2019.
In a statement, PayPal said it was “honored” that it was breaking new barriers in the country.
“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”, it said.
“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 transaction is expected to close in the fourth quarter of 2019 and is subject to customary closing conditions”, it added.
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