It is widely known that international companies trying to break into the lucrative China market get tangled up in a web of complicated issues that eventually lead to their downfall. TechWireAsia reported that PayPal is now more confident of obtaining a payment license from authorities to operate in China. PayPal has already been operating in China for a while now but only performing cross-border transaction. The license would allow it to handle domestic payments too.

Even if PayPal was approved to do business in China, the chances of it dominating the market are slim. Alibaba’s Alipay controls 47% market share and Tencent’s TenPay holds 21% according to research firm, Analysis International. For PayPal to crack into China, they will have to win over the market by ensuring their security is top-class and their fees are attractively low.

Following the inspiring innovation of Square, founded by Twitter co-founder, Jack Dorsey; PayPal is offering a new service called PayPal Here which basically turns smartphones into terminals which can accept credit, debit cards, PayPal and check transactions. This is a great idea that can really boost sales for small businesses. But of course like any good entrepreneur or businessman, opportunities are seen and taken fast. There are already a number of Square-clones in China, such as Yeahka and QFPay.

China really is a fascinating place, in terms of pace of change. Of course cash still rules as the main choice of payment, but the credit card wave that lasted for a much longer time in other countries could be short-lived in China and potentially overtaken by more advanced forms such as mobile payment through services like PayPal Here or even NFC. Having said that, there are now more than 268 million credit cards in China, a growth rate of 90x in less than 10 years.

However PayPal manages to strategically enter China, the fight will be worth it. By 2015, consulting firm BCG predicts by 2015, there will be 320 million online buyers. Get ready to rumble!

Jason is an Australian born Chinese living in Beijing, specializing in entrepreneurship, start-ups and the investment eco-system in China, especially in the tech and social area.

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