China could be opening the door to U.S.-based payments companies.
Earlier this week, China granted 19 e-payment licenses, including one to a foreign-owned company, Beijing Chanjen, which is owned by the Singapore-based software company Ufida. The license allows companies to perform electronic payment transactions in the People’s Republic.
This is the first time an digital payments license has been awarded in China to a foreign-owned company, Seeking Alpha noted.
Could this mean the door is opening for major U.S. players such as PayPal and Square? Sina, the Chinese media outlet that first reported the news, wrote that “Insiders said the move reflects the central bank’s openness to foreign investment to some extent.”
China has granted 269 e-payments licenses since 2011, when it began issuing them. Beijing Chanjen’s status as a joint venture and alleged connections with the government may have helped with the granting of the license, but still, this is a tantalizing sign for foreign payment processors looking to tap a huge market.
Thad Peterson from the Aite Group cited three main reasons American companies are anxious to enter China:
1) The Chinese online shopping market is exploding, driven by the rapid penetration of smartphones that are delivering the web to people who otherwise wouldn’t have online access
2) Payment companies would love to get a piece of that sales volume, as the market is enormous
3) Having the ability to transact in China helps to open the door for cross-border e-payments, which will be increasingly important as the e-commerce space becomes more global.
PayPal, among other payments companies, has shown signs it is looking to enter the Chinese market. EBay CEO and interim head of PayPal John Donahoe said earlier this week that he saw some “encouraging signs” the company would be granted a Chinese e-payments license soon.
But PayPal and other U.S. companies will have to wait until the next licensing round later this year to see.