PayPal’s ambition and uphill battle in China – ClearTips

Over the past few months, PayPal has been quietly gearing up for its expansion into China.

In China’s response to the recent Boao Forum for Asia, Davos, the US payment giant said its strategy for China is not to challenge the duel between Alipay and Veatch Pay. Instead, it seeks to focus on cross-border trade and provides both a gateway for Chinese merchants to collect funds and for Chinese consumers to pay for foreign goods.

This is definitely an attractive area. According to market research firm iResearch, the market size of cross-border e-commerce in China increased from 3 trillion yuan ($ 460 million) to around 6 trillion yuan between 2016 and 2021.

But the location has also become crowded in recent years and PayPal may be late, said a China-based manager for an American tech veteran who asked for anonymity because he is not authorized to speak to the media.

On Amazon, one of the largest markets for Chinese exporters to sell online, there are already established options for merchants to collect money. Setting up a bank account in a foreign country can be difficult for a small-time Chinese exporter, not to mention the high fees for remittances, so such merchants often seek third-party payment transfer solutions such as US- Based pioneers and Chinese counterparts Pinggong and Lianlian, who charge relatively low fees for depositing sales of merchants at home into their bank accounts.

China has stricter policies for foreign exchange and electronic payments, but PayPal has already overcome regulatory hurdles. In January, the American fintech titan became the first foreign company to license for an online payment processor in China, as it bought shares in a local payment firm.

Achieving government greenery is the first step. The appeal of PayPal could offer a large number of Chinese e-commerce exporters, who are now dishing out the likes of Amazon and eBay.

“At the end of the day, customers only care about which service is the cheapest and easiest to use,” said the China-based manager from the American firm.

“The Chinese cross-border payment solution has achieved impressive results in terms of products, scale, and fees,” the person said. “I don’t think Peeple is a chance.”

Exporters who build their online stores rather than sell on the mainstream marketplace may still find PayPal essential as a tool for accepting payments from customers, given Apple’s wide reach.

For cross-border payments, PayPal is competing with Tencent’s WeChat Pay and Ant Group’s Alipay, which have long been ubiquitous in China. Both e-wallets are aggressively increasing their global involvement so that external travelers from China are paid at foreign retailers as if they are at home. Domestic buyers of foreign products often use Chinese-owned e-commerce apps, which are Alipay or WeChat Pay, as their payment processors. Credit cards never became prevalent in China.

Cross-border payments have also become one of Ant’s main development goals, according to the prospectus of its now initial initial public offering. While foreign businesses accounted for about 5% of the firm’s revenue in the second half of 2020, much of that segment came from cross-border payments. At the time, Ant also had plans to spend HK $ 52.8 billion, or 40%, from its IPO on expanding its cross-border payments and merchant services, as well as other overseas functionalities.

“It depends if Peeple is able to offer a lower fee than Ant,” said a person who previously worked on a cross-border purse for a Chinese company. “But PayPal itself is not famous for low fees.”

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