In another move solidifying its emboldened links with Chinese payments providers, PayPal Holdings Inc. announced Wednesday it will support UnionPay International in its digital wallet. Eventually, UnionPay International, whose financial-institution members have issued more than 7.5 billion cards globally, according to China Daily, will look for ways to support PayPal’s merchant and consumer efforts in China, PayPal says.
Initially UnionPay card data can be added to PayPal wallets in Australia, the Philippines, Singapore, South Korea, and Thailand. PayPal says 30 more markets will be added in 2020, but did not disclose which ones. UnionPay cardholders, once enrolled in PayPal, will be able to shop at 24 million merchants globally, PayPal says.
The two companies also will collaborate on growing digital payments in China and elsewhere, including potentially enabling PayPal customers to use PayPal at merchants that accept UnionPay. That expansion to physical retail locations could happen in the first half of 2021, according to a research note from New York City-based Keefe, Bruyette & Woods, an equity research firm.
Shanghai-based UnionPay says its network now includes 178 countries and regions covering 29 million merchants. In the Americas, UnionPay acceptance reaches 70% of merchants, the card brand says.
Much of its international acceptance network is geared to popular destinations for Chinese tourists, such as New York City. China Daily says more than 270 million merchant locations outside of China accept UnionPay.
PayPal’s deal with UnionPay is likely to be very positive for the San Jose, Calif.-based company, says KBW. “We view the expansion as a positive as it gives PayPal the potential to expand merchant acceptance in and outside of China through a reciprocal agreement with UnionPay, similar to what it has with [Discover Financial Services] in the U.S. today,” the note says. In 2005, Discover and UnionPay, then known as China UnionPay, announced an alliance to enable Discover card acceptance in China and UnionPay acceptance on Discover’s U.S. network.
The UnionPay deal follows PayPal’s 70% stake in China’s Guofubao Information Technology Co. Ltd., better known as Gopay.
With the acquisition, PayPal wins the right to be the first foreign company that can directly offer online payments in China, a market boasting 500 million online shoppers who are expected to ring up almost $2 trillion in sales in 2019.
PayPal’s deals also tie into a new U.S.-China trade deal that provides an avenue for U.S. payments firms to operate in China.