PayPal Holdings has become the first foreign payments company to gain a foothold in China, more than a year after Beijing said it would open the space to foreign firms.
But the deal may be less than it seems, as PayPal, a leader in U.S. digital payments processing, enters China as a bit player. Incumbents Ant Financial and Tencent occupy 90% of the market already, leaving little room for the newcomer to make its mark.
“I’d imagine PayPal’s going to struggle to punch through the existing incumbents,” says Robert Carnell, Chief Economist and Head of Research Asia-Pacific at ING Asia. “China tends to only open up markets when it thinks domestic firms already have it pretty much stitched up and aren’t too worried about the competition.”