eBay's Inc.
(
EBAY
) existing payment platform, PayPal, sees ample expansion
opportunities in China, an e-commerce market growing at a
double-digit percentage rate.
In order to expand successfully and comply with the Chinese
regulations, eBay is trying to obtain a domestic payment license
from the Chinese authorities. This would enable Paypal to compete
with AliPay, a payments company under local e-commerce giant
Alibaba Group. If PayPal is lucky enough to get a license, it could
become a major player in the Chinese online payments space by
bringing its Paypal Here mobile card payments service to China.
Currently, PayPal offers cross-border transactions for its
Chinese users but this license will allow the company to handle
domestic payments as well, boosting its payments volume.
According to the global management consulting firm, Boston
Consulting Group (BCG), China ranks second in terms of online
shoppers, with 145 million buyers (versus 175 million in the United
States). Another impressive forecast is that the number of e-buyers
will jump, shoot and fly through 2015, growing from 145 million to
329 million.
Overall, ecommerce will account for 7.4% of the country's total
retail value by 2015, up from 3.3% in 2011 indicating exceptionally
high growth compared to the U.S., which took almost a decade to
reach that level.
In the recently concluded fourth quarter, Payments revenue
increased 12.0% sequentially and 27.6% from the year-ago quarter.
Revenue from transactions was up 12.0% sequentially. For the year
2011, the company processed a total transaction volume of nearly
$119 billion.
So, if PayPal manages to enter the Chinese market, still one of
the world's fastest growing economies, the company could see a
significant increase in its total payments volume, which would
directly impact its net revenue from online payments.
Moreover, the company also plans to enter the domestic online
payments market in India, which is somewhat smaller than China.
According to BCG, the share of total retail carried out online in
India was only 0.9% in 2010, but is projected to reach 4.5% by
2016. It therefore makes a lot of sense for established ecommerce
players like eBay to tap this growth in China and India.
Of course, we remain concerned about the increasing competition
from major online retailers, such as
Amazon.com
(
AMZN
), which has been joined by many other smaller players in recent
times. Though eBay has been taking all possible steps to improve
its PayPal payments business and shows great promise, here too
competition may be expected to pick up as banks and other companies
announce their own payment systems and
Google Inc's
(
GOOG
) digital wallet gathers steam.
Currently, eBay shares carry a Zacks #2 Rank, indicating a
short-term Buy recommendation.
AMAZON.COM INC (
AMZN
): Free Stock Analysis Report
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EBAY
): Free Stock Analysis Report
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GOOG
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