Are Physical Banks Headed the Way of the Dodo?

PayPal has been making some big moves this year in an effort to expand services and reach even more consumers, particularly the millions in China’s ever-growing market of online shoppers. Just recently announced was the launch of its China Connect service, which includes a tie-up with UnionPay, China’s one and only bank card issuer.

Many Chinese already use PayPal, and the number only grows with each passing day. But the company desires an even larger piece of these transactions as the demand for foreign goods is hotter than ever. Currently, approximately 25% of PayPal’s transactions are cross border (outside of the United States). An unspecified, yet reportedly significant, chunk of that 25% is from China (along with Australia, Brazil, Germany, and the United Kingdom).


China Connect allows consumers to make direct (read as: faster and easier) payments to PayPal’s global merchants. What’s more is that this partnership will allow a larger number of businesses to offer their products and services on UnionPay’s “Shop the World” site.

This is a small step in the right direction concerning PayPal’s overall plans to continue to transform its business services, as the company boldly laid out last week on their PayPal Stories blog. The aim is to become the central component at the forefront of global e-commerce, having already adapted itself to accommodate the ever-increasing number of consumers using mobile technology to make purchases.

In a recent blog post, PayPal CEO Dan Schulman stated:

“By delivering a platform that is technology and payment agnostic, we’re making it possible for people to move and manage their money whenever they want and wherever they are, on whatever device they have at hand. As all commerce becomes digital, PayPal will be the one solution partner merchants trust to help them create seamless shopping experiences that strengthen engagement with their customers, while protecting their security.”

Yet another step on this path is Schulman’s plan to take the company public on the NASDAQ (listed as PYPL), making them independent of current parent company eBay.

Amidst all of this, when looking at China again, PayPal might need to back up their talk with more numbers if it is expecting to operate on the same level that competing online payment service Alipay does.

Alipay was launched in 2004 by Alibaba Group, and now stands as China’s most popular payment service, with over 300 million users. This compares to PayPal’s 165 million active users. Looking at total payment volume, PayPal handled US$234.6 billion in 2014 while Alipay processed US$520 billion. Time will tell if PayPal will continue to grow in popularity outside of the United States, and among the millions of Chinese shoppers.

For now, these two online payment giants dominate the global market in digital transactions, hauling in the lion’s share of resulting revenue. Not only that, both are also transitioning into actual banking and credit services, making it that much easier for people to spend spend spend.

This trend of increasing consumer dependency on payment platforms such as these, combined with aggressive pushes for expansion—in terms of services and overall function—may result in these companies shoving aside physical banks completely.