PayPal seeking a place beside Alipay and WeChat in China’s booming online payment market

The US company is targeting foreign buyers who shop online in China as a first step, and wants to cooperate with other payment firms

PUBLISHED : Thursday, 07 September, 2017, 8:34am
UPDATED : Thursday, 07 September, 2017, 8:34am

China’s online payment market is pretty much sewn up by technology giants Alibaba Group, through its Alipay system, and Tencent Holdings’ WeChat Pay, but PayPal, the US company that dates back to the early days of online banking, thinks it has found a way to get a foothold.

It wants to help foreign consumers shop in Chinese online stores.

“PayPal is well known among foreign consumers [especially in the US], and is considered a safe payment method when buying products in China’s online shops,” said Lu Liuliu, head of China merchants services at PayPal. “I think PayPal has its an advantage even though China’s online payment market is seeing explosive growth.”

PayPal’s own data shows China became the most popular cross-border online shopping destination globally in 2016, followed by the US and the UK. One-third of PayPal’s 210 million users have bought products from Chinese retail websites.

The company has reached an agreement with Chinese internet firm Baidu in July that connects online payment service Baidu Wallet’s 700 million Chinese shoppers with 17 million PayPal merchants. It is also seeking opportunities to cooperate with China’s major online payment operators, Lu said, without giving further details.

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But one Chinese merchant who sells his products mainly in the US and Europe and who has used PayPal for 16 years, complained about the slow development of its service in China.

“In recent years, I do not see a lot of progress for PayPal in the Chinese market, and some of the problems I come across cannot be fundamentally solved,” said Wang Liping, chief executive of Yisheng Yisha, a wedding dress maker in the northeastern Chinese city of Dalian.

“A small step is of no use here. PayPal needs fundamental change if the company wants to take its place in China’s booming online payment market.”

The company also faces challenges in dealing with an unfamiliar market, according to one analyst.

“The difficult issue for PayPal in developing in the Chinese market is not when it comes to China, but whether it can understand Chinese local culture very well,” said IDC China managing director Kitty Fok.

“Foreign players find it hard to understand phenomena in the Chinese market, such as the popularity of red envelopes,” she said, referring to the traditional way of giving monetary gifts in China at holidays or on special occasions. WeChat Pay developed a red envelope app which allows users to transfer money from one user of the app to another, a service which proved extremely popular.

Alibaba is the owner of South China Morning Post.