On May 27, 2026, at the 20th Shenzhen Financial Expo, Tencent TenPay Global officially announced its connection with PayPal World.
This move allows American users to make purchases in China without having to bind WeChat. They can directly open PayPal and scan the WeChat payment merchant code.
This incident has a significant impact on the gross profit margin of Tencent’s cross-border payment business.
For example, it is like a community milk tea shop that has been open for many years and is suddenly connected to the corporate group dining channel in surrounding office buildings. It not only adds a stable and large customer flow, but also sells more high-margin customized products, and the overall profitability level naturally increases.
From the perspective of scale effect, American PayPal users will spend approximately US$4.1-4.2 billion in China in 2026, and the new transaction amount brought by the cooperation in 2027 will reach US$4.5-5 billion, directly driving Tencent’s cross-border payment transaction scale to increase by 60% – 80%.
Tencent’s initial investment in technology, marketing, compliance and other total costs for this cooperation is approximately 220 million to 350 million yuan. These fixed costs will be diluted quickly as the scale of the transaction expands, just like the one-time investment in equipment and decoration costs for a milk tea shop will be diluted continuously as the number of cups sold increases.
In terms of income structure, the profit from this cooperation does not come solely from handling fees, but forms a three-tier gross profit contribution structure.
Using fee income as a basic basis, Tencent can get 40% – 50% of the total fees, corresponding to a gross profit margin of 60% – 70%, which is higher than the average level of 52% in the financial technology sector; in terms of exchange rate services, when PayPal users settle in US dollars, Tencent quotes a price that is 0.3% – 0.8% higher than the central bank’s central parity rate. The gross profit margin of this business exceeds 80%, contributing 20% –
The 25% gross profit is like the additional ingredients in a milk tea shop, with extremely low cost but high premium; in terms of technical services, PayPal needs to pay technical service fees to access the WeChat merchant network. The gross profit margin of this business exceeds 70%, which is the core engine of long-term growth.
From the perspective of the increase in gross profit margin, in the short term, Tencent launched a handling fee reduction policy to promote inbound payments in 2026. A single purchase of 200 yuan or less is exempted from 3% handling fee, and the first international card user is exempted from handling fees within 1,000 yuan per day within 90 days. This will slightly lower the short-term gross profit margin, but the scale effect will soon offset this part of the impact.
It is expected that the gross profit margin of cross-border payment business will increase by 1 to 3 percentage points from 2026 to 2027, pushing the overall gross profit margin of the financial technology sector to the range of 53% to 54% in the long term.
As of Q1 2026, the gross profit margin of Tencent’s financial technology and enterprise services segment is 52%. The growth of cross-border payment business will further optimize the income structure of the entire segment.
However, the expectation of an increase in gross profit margin is not entirely certain, and there are three types of potential risks that may offset earnings.
If PayPal requires an increase in the transaction share ratio, for every 1 percentage point increase in the share, the gross profit margin of cross-border payments may decrease by 0.5-0.8 percentage points; significant fluctuations in the RMB exchange rate may lead to exchange losses, and in extreme cases may cause the gross profit margin to fluctuate by 1-2 percentage points; the tightening of cross-border payment regulatory policies will increase one-time compliance costs and affect short-term gross profit margins.
For ordinary investors, there is no need to understand complex cross-border clearing rules. They only need to understand that this cooperation is not a simple scenario expansion, but has truly improved the profitability of cross-border payment business from both the transaction scale and income structure.
In the future, as the service covers PayPal users in more countries, the room for profit release will further expand.
