Cover from Visual China

The US paying giant PayPal curve into China is like a large stone in the lake. Everyone cares whether this stone can crack a crack and incite the domestic payment pattern.

PayPal is not only a US payment giant, but also an international payment giant. It has opened up more than 200 markets worldwide. The market outside the US contributed 43% of the transaction volume and 54% of the net income (2018 data).

The domestic payment institutions are almost the same, PayPal is obviously different, and the degree of internationalization is even more difficult for domestic payment institutions. Because of this, PayPal will give people imagination when they enter China.

The question is, can foreign monks read the domestic classics?

Who is PayPal?

Many people know PayPal, starting with Alipay. The market generally believes that there is a blue story between Alipay and PayPal.

PayPal was established in 1998 and was acquired by ebay in 2002 as a trading tool for ebay buyers and sellers. In 2003, Taobao launched Alipay to provide secured transactions for buyers and sellers. From the order of view, Alipay is inspired by PayPal.

In the first few years, Alipay and PayPal were like two parallel lines, doing similar things in different markets, such as the evolution from payment instruments to payment wallets, and then derived credit payments (loan) product. In 2014, the two began to have significant differences at the strategic level – in this year, Ant Financial was established and turned to a comprehensive financial services group; and PayPal was brewing and eBay split to seek independent listing.

After the year, the two completed their respective big moves, Alipay once again strategically upgraded and transformed from a financial service platform to a life service platform; PayPal went on the market and began to scale and camp under the baton of Wall Street. Run and run.

After three years, the two have been decided to be different. Alipay turned into a one-stop shopPayPal is still a payment agency, paying up to 89% of revenue contribution.

So, what about the performance of PayPal in terms of the payment business itself?

(1)Size size


PayPal is an international payment giant, but compared with domestic payment institutions, it is only a second-tier level. In 2018, PayPal achieved a total transaction volume of US$508.7 billion worldwide (excluding gateway payments), equivalent to RMB 4 trillion, placed in the Chinese market (2018 domestic non-bank payment transaction size 208 trillion yuan) , accounting for less than 2%.

From the perspective of growth trends, the average annual growth rate of PayPal transactions has been between 20% and 30% since 2013. Compared with the growth rate of domestic payment institutions in the same period, it can only be said to be unsatisfactory.


(2) Profitability


The transaction size is not dominant, but PayPal’s profitability is absolutely paralyzed. In 2018, PayPal achieved a net profit of $2.057 billion, equivalent to RMB 14.1 billion. In contrast, domestic payment institutions are trapped in a difficult stalemate in profitability, and they have to bend for three buckets of rice. Individual institutions even take risks, and operate illegally and even continuously. Even a few giants achieve commercial-level sustainability through “loan subsidy payments”.

(excluding the United Kingdom), 11% from the United Kingdom, while other nearly 200 countries and regions only contributed Less than 15% of net income.

In addition, long-term cross-border payment market has become a part of PayPal’s differentiated competitiveness.

Before 2015, PayPal has been financially trapped in exchange rate risk, such as a loss of $25 million in foreign exchange against the US dollar in 2014 and a loss of $8 million in 2013, followed by flexible application of risk hedging instruments such as hedging. PayPal has strong exchange rate risk management capabilities, and exchange losses can no longer threaten the international payment giant.

The problem is coming. Since the focus of PayPal at this stage is still cross-border payment, what is the significance of acquiring Guofubao? The biggest significance is that it has obtained a domestic payment license, which can convert cross-border payment users into payment users in China. After three or five years of accumulation, it will have a strong foundation and foundation for the domestic market.

PayPal is followed by PayPal

For any international financial institution, entering the Chinese market is of strategic importance, which coincides with the time window for China’s financial market to open up to the outside world. For PayPal, the layout of the Chinese market does not need to be used at this time. Many considerations, no matter what results are achieved after entering the Chinese market, are afterward, and entering itself is of strategic significance.

This is true for PayPal, as well as for other international giants. PayPal acquired Guofubao, and other international giants will not miss the opportunity. There are more than one hundred mobile payment licenses in China. In addition to the heads, most payment agencies have a hard time, and they are willing to give up control.

So, for the domestic payment market, although PayPal has limited influence in China, PayPal is only a pioneer, and there are more PayPals coming in after PayPal. There are many institutions coming in. Whether it is the competition rules of the domestic market or the internationalization of domestic payment institutions, there is a new imagination space. The third-party payment market in China will open a new page.

This article was originally created by “Hanyan whispering”, and the author is assistant to the president of Suning Financial Research Institute.