Can PayPal Survive the Chinese Mobile Payments Market?

We’ve all known for some time now that PayPal’s about to lose its eBay connection, and as such, the mobile payments provider has been eager to innovate so it can cover the gap that’s about to hit. A positive development of a sort has recently arrived as PayPal is taking aim at the Chinese mobile payments market following a change in the country’s legal environment.

Recently, China took the rather unusual step of opening up access to its mobile payments market, currently dominated by the two-party system that is Ant Financial’s Alipay and Tencent’s WeChat Pay. The former is commonly regarded as the “big bucks” system, while the latter is geared toward smaller purchases. Between the two, they control around 90 percent of the overall market.

There were some conditions to the opening, however, including that information collected needs to be stored entirely in China, a local business had to be set up, and data back up and payment service operations needed to be established in China as well. Not exactly onerous, but not exactly simple, such moves would allow businesses to take a crack at landing some of the billion-plus residents of China.

The good news here is that PayPal actually has a foot in the door already. It had been working with the Baidu search engine—one of the leaders of search in China—to connect PayPal to 100 million Baidu Wallet users. That means those 100 million could use PayPal at 17 million merchants, and it didn’t stop there.

However, there’s one issue—rather, two—between PayPal and success: Alipay and WeChat Pay. While the mobile payments market in China is positively massive—the first 10 months of 2017 say around $16.7 trillion was spent therein—it’s currently occupied by two local favorites. Mostly occupied, of course; there are still outliers doing great things, and even a fraction of a percent of a $16.7 trillion market is still a hefty payday.

The bad news is that PayPal’s chances of getting anywhere in a market with entrenched favorites is slim. Just ask Microsoft how Windows Phone worked out. But the good news is that even a slim victory in a market this big is still a win, of sorts. With eBay soon out of the picture, a win is just what PayPal needs going forward.