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PayPal Enters Into China's Payment Space With GoPay Buyout

Zacks Equity Research

PayPal Holdings, Inc. PYPL recently announced that it has completed the acquisition of a 70% equity interest in Guofubao Information Technology Co., Ltd. (GoPay).

The news comes on the heels of the announcement that China's central bank has approved PayPal’s appeal to acquire a 70% stake in GoPay for an undisclosed deal value.

The latest deal makes PayPal the first foreign company to make inroads into the digital payment service market in China.

PayPal Holdings, Inc. Price and Consensus


PayPal Holdings, Inc. Price and Consensus

PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote

China Digital Payment Market Holds Promise

The digital payment market in China is a totally unadulterated market with huge scope for expansion.

Homegrown giants Alibaba Group Holding Limited’s BABA Alipay and Tencent Holdings Limited’s TCEHY WeChat Pay have been dominating this lucrative market over the past few years. Both Alipay and WeChat generally engage in intra-country money transfer and e-wallet services. Around 92% of China's population use Wechat Pay or Alipay as their main means of payment.

A Statista report suggests that this market is expected to generate $1,570.2 billion revenues in 2019 and the figure is anticipated to reach $3,100.6 billion by 2023 at a CAGR of 18.5%.

Paypal is making all efforts to capitalize on this burgeoning demand. The deal will allow the company to further penetrate into this market and benefit from strong growth in the digital payment space.

To make the most of this market, other U.S. credit card companies including American Express Company AXP have been continuously attempting to enter the market in China. However, restriction on U.S. entities to enter this arena has been strong, making it difficult for them to work here. However, last November, American Express became the first U.S. card platform to provide card-clearing services in China.

In addition, players like Mastercard Incorporated and Visa Inc. are trying hard to collaborate with China’s domestic companies to tap the well-guarded uncharted market.

Bottom Line

For now, PayPal remains the only player to engage in cross-border transaction in China and its consumers have access to several online stores worldwide. Consumers are able to purchase goods online across the globe, which helps it in winning more clients.

The latest deal should definitely help PayPal establish a strong foothold and succeed as a trader in the region. The online push will further boost the company’s expansion.

Zacks Rank

Currently, PayPal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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