PayPal is one of the largest names in the online payment industry. It makes it super easy to make online transactions across national borders. Making the transactions with other people within your borders is a bit trickier if you happen to live in certain countries. PayPal is hoping to change that for China and India.
PayPal announced today their intentions to bring domestic transactions through their service to the people of China and India. Of course, the biggest issue in terms of entry lies with China and PayPal is currently "applying for a domestic payment license" within the country according to PC World.
China would be a fantastic market for PayPal to enter due to its estimated 193 million e-commerce users. Besides government regulations, PayPal has another obstacle in their way - AliPay. AliPay is the already established e-payment group under the Alibaba Group. AliPay owns the largest share of the online payment market at 46.9 percent.
This leaves PayPal with quite the challenge when and if they enter the Chinese marketplace. Analysts speaking to PC World seem to agree with one saying that the "competition will be fierce." In what could be an even larger threat, however, is obtaining the business license.
Chinese law requires that any online payment system be Chinese owned. Alibaba Group is an internationally owned company so it was required to spin off AliPay into its own Chinese-centric business. What if PayPal fell under the same regulations? Would they create a new company just for China?
It's important to note that PayPal operates within Hong Kong. While it doesn't automatically give PayPal the go ahead for mainland China, it probably is a bargaining tool. The amount of transactions that flow into Hong Kong everyday must entice the Chinese government into wanting PayPal for the mainland.
Fortunately, PayPal would face no such hurdles in India. While the online payment economy is much smaller in India, it can only go up from here. Research had indicated that 4.5 percent of all retail transactions will be performed online in India by 2016. This leaves PayPal the perfect spot to swoop in and get in on India during its growth phase.
All of this is just the next step in PayPal's move to expand beyond their initial offering. They recently announced PayPal Here which is a mobile payment system for small businesses. Just think if PayPal was able to get PayPal Here into China, it would explode.
The company has also moved into big box retail by offering PayPal Checkout to customers of The Home Depot. The service allows customers to buy products with only their phone number and a PIN.
It will be a while before PayPal hears back on whether or not they will be allowed to operate in China. We'll keep you updated on any developments.