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The Stage Is Set for a Tencent-PayPal Clash in Brazil

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Tencent puts $180 million in Nubank

Tencent (TCEHY) has recently disclosed that it will invest $180 million for a minority stake in Brazilian financial technology company Nubank, known formally as Nu Pagamentos. Nubank is a provider of digital financial services, including payment processing. It’s on track to expand into consumer lending by the year’s end.

Tencent has said that its aim in becoming an investor in Nubank is to help the startup develop into a full-service finance platform for consumers. But Tencent’s backing of Nubank sets the stage for a clash with PayPal (PYPL), which is also hunting for growth opportunities around the world, including in Brazil. In August, PayPal announced a partnership with Brazil’s largest private bank, Itaú Unibanco, by way of which it will offer its services to the bank’s card customers.

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Tencent is browsing for opportunities

PayPal currently serves 3.8 million customers in Brazil and expects to add 1.0 million more customers by around 2020 as a result of the deal with Itaú Unibanco, the company told Reuters. In addition to its core payment business, PayPal also extends loans to its customers, both consumers and merchants.

Buying a stake in Nubank marks Tencent’s debut in Brazil as the Chinese company browses the world for growth opportunities. Last year, it teamed up with eBay (EBAY) and Microsoft (MSFT) to invest $1.4 billion in Indian e-commerce company Flipkart. eBay sold its Flipkart holdings a few months ago, taking advantage of a transaction in which Walmart (WMT) bought a 77% equity stake in Flipkart.

Tencent’s revenue grew 30%

Walmart is a Tencent partner. In March, it dropped Alibaba’s Alipay in favor of Tencent’s WeChat Pay in its stores in western China. Tencent’s revenue rose 30% year-over-year to $11.1 billion in the second quarter. The company is expected to report revenue of $12 billion in the third quarter.

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