California-based online payment company Paypal has completed the deal to acquire 70% of Chinese digital payment service provider Gopay, a move that allows the US company to operate payment services in the country.
Why it matters: By taking on majority ownership of Gopay, Paypal is a step closer to becoming the first foreign company to provide digital payment services in China, which for many years foreign companies like MasterCard and Visa have been trying to do.
Details: Paypal acquired the stake in Gopay through its Shanghai-based subsidiary Yinbaobao Information Technology. The People’s Bank of China, the country’s central bank, approved the deal in late September. The companies did not disclose details including the deal size.
- Gopay is a relatively small player in China’s payment space, which is dominated by Alipay and WeChat Pay. However, with the partnership, Paypal gains access to the firm’s license to provide online, mobile, and cross-border renminbi payments, something it has been working on for years.
Context: With policies favoring domestic players, foreign firms have encountered major hurdles when attempting to enter China.
- China has been more friendly to foreign companies wanting to apply for licenses since 2017, but the approval process has been slow. The China-US trade war has also made the process more complicated.
- Gopay, also known as Guofubao in China, was founded in 2011 as a joint venture between the China International Electronic Commerce Center (CIECC), affiliated with the Ministry of Commerce, and HNA Retailing Holding, but is now jointly held by the CIECC and a subsidiary, Cofortune Information Technology Co., according to its website.