China’s Payment Apps Give U.S. Bankers Nightmares

The critical difference is that in China, the apps effectively <i>are</i> the banks, whereas in the US, regulatory capture ensures that the banks stay the banks and it&#x27;s the app&#x27;s problem to figure out how to interface with them.<p>The reason the banks are scared is not because &quot;banks&quot; are not involved. They&#x27;re scared because these apps have successfully vertically integrated to <i>become</i> banks. This is the logical next step for Apple &#x2F; Google Pay and I&#x27;m sure it has consumer banks shaking in their boots, because there&#x27;s no way they can outcompete those companies in tech. So instead they focus on regulatory capture and making it as difficult as possible for tech companies to play in their sandbox without banker supervision.<p>One only needs to look at the adoption rate of Apple Pay outside the US to see this system at work. In parts of Europe and the UK it&#x27;s extremely popular because the banking systems have much friendlier regulations and fewer integration points. In the US the uptake has been slow because the integration is so cumbersome and the banks &#x2F; payment networks control the entire cycle from point-of-sale to deposit.

The banks have been pushing for a cashless society for awhile now.<p>So once they achieve their goal of preventing me from paying someone else $10 without a 3rd party getting a 2-3% fee for the privilege of exchanging money between two private parties, it won&#x27;t be them getting the 2-3%? Cry me a river.

Regulation in the US makes it harder for this to happen but 3 stepping stones will let the tide turn and Amazon is very close to crossing them.<p>1. Money transmission regulations require at least $2 million in reserves and 2 years to get a license to transmit money in all 50 states.<p>2. Knowing the credit and identity of your customers is critical in preventing fraud, illegal transactions, and other issues which cost huge $$$ to payment ecosystem providers with the current consumer guarantees in the US. Only a company with mass market deep data on every user’s consumer patterns can pull this off cheaply, and Amazon is far closer to this than anyone else.<p>3. Getting plugged into the trusted banking ecosystem for deposits to consumer accounts and the whole ACH process is a total mess. Banking regulation puts a wide number of restrictions on anyone who tries to act like a bank to get access to those payment networks. A mass market company could probably replace that, but it has to have a way to do what it does whiteout being regulated as a bank.<p>These will be broken down one at a time.

Even the first line of illustration is kind of misleading - &quot;Paycheck is deposited into employee&#x27;s bank account&quot;; there&#x27;s no such thing as a paycheck in most places worldwide, no checks get involved. The employers pay out the salary with free or cheap bank-to-bank payments, and have done it long enough that the term &#x27;check&#x27; has no colloquial relation to your salary.<p>The main difference for accessibility of such payments is that, unlike cards, there&#x27;s no percentage fee involved; and that, unlike paper checks, processing them can be so automated and cheap that payments can be offered for free or nearly so.

This has been like this for at least 2 years over there now. This is facebook&#x2F;whatsapp best&#x27;s and only strategy to stop living off consumer data and start living off an actual service industry. Very poor management decision from my perspective, perhaps they had trouble gathering political support.

Not to be overly pessimistic but this sentiment seems to be one of the the default themes at the moment. Fear of not getting a cut whether you offer value in that space or not.

I applied to YC to bring this idea to the US (rejected). Credit cards are our primary form of digital money and their fees are excessive.<p>The basic design was ACH money into the wallet, transfer money between balances for ultra low cost (1%), ACH money out of the wallet.<p>The difficulties are regulation. Doing this would make you a money service business and banks really don&#x27;t want to touch that. Plus it costs a nice chunk of change to register in every state.<p>If card processing companies are taking around 3% + 30 cents of each transaction, they&#x27;ve effectively devalued our money by that much. I think you could skip all the NFC terminal nonsense and just do QR code based payments with the camera. Make low fee transactions a reality. Then you could pay for individual news articles online, support forums monthly (no way to pay a fraction of a cent for a page view), or tip your favorite streamer. It would be beautiful. It could also set us free from the ad based tracking economy.<p>Maybe one of the big players will implement it (Google, Apple, Walmart), or at least figure out the business model for someone to copy. I think it could really change the US economy.

there are a couple important things to consider here<p>- who is liable or who will make it right when your money is stolen? - retail banking in the US sucks in every way except that they will reimburse you for fraud<p>if it was up to me all my payments would only happen on a cryptocurrency layer and all my cash storage would happen in an account you could only withdraw from in person to the crypto account. the pull model without credentials banks work under is totally flawed and wont last much longer.

Is there any evidence these chat based payment apps (venmo, apple pay, facebook messenger, snapchat...?) are replacing credit card transactions in the US? They seem to replace person to person cash transactions instead.

How do these systems compare with Mpesa, which I&#x27;m given to understand is big in Africa?

All the payment stuff aside, how does money get into the Alipay&#x2F;Wechat ecosystem? How do I add money to the account?<p>In the US, where the single purpose Starbucks wallet is outpacing Apple Pay (<a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2018&#x2F;05&#x2F;22&#x2F;starbuckss-mobile-payment-service-is-slightly-outpacing-apples&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2018&#x2F;05&#x2F;22&#x2F;starbuckss-mobile-payment-...</a>), most users pay into the thing with a credit card, so the banks still get their cut. Sure, they aren&#x27;t getting the cut when it&#x27;s spent on coffee like they would with a credit card, but in some ways, they already got it on the front end.<p>Is the bank totally out of the picture in the Ali&#x2F;Wec version? Do people put cash money into Ali&#x2F;Wec via top-up shops or other experiences? Direct deposit salary? Or is it a free transfer from a bank?

The May 3 edition of &quot;The Economist&quot; had a special section on this topic which excellent.

Its interesting how they didn&#x27;t mention Paypal as a wannabe Alipay tech company, last time I used Paypal, its basically functioned as an alternate bank account that just doesn&#x27;t accrue interest whenever I use it to buy stuff on the internet or sell stuff. I can also see the similarities between the UI of my actual online bank account and Paypal account. Users (like me) will also really appreciate if they took on more banking stuff because I already have cash in the account. I think Stripe is similar in that aspect too.<p>This is basically Paypal&#x27;s dream scenario to become a bank because they already deal with the regulatory stuff but don&#x27;t get the full money earning potential of a bank.

&gt;Western bankers and credit-card executives who travel to China keep returning with the same anxiety: Payments can happen cheaply and easily without them.<p>but there are plenty of &quot;bank -&gt; wallet -&gt; merchant&quot; services in US as well. most notably paypal: you deposit money to your paypal wallet, and spend that money at various online merchants, no credit cards involved.

As long as banks get the FDIC guarantee while American WeChat-type competitors don&#x27;t, they&#x27;ll be fine.

If money has to flow in the economy through limited hubs then hubs automatically grow rich.<p>It should be a fundamental right in the capitalist country, right to process payment for any party. Today, we need special license&#x2F;approval for this which limits the &quot;access to disrupt&quot; to few lucky people who have a connection in the big banks. Startups like stripe have to give away a chunk of their equity to old guards at big banks in return of access to a market.<p>Is this the best a capitalist country may offer?

I don’t know why our society hasn’t fully realized that everything is 3% more expensive specifically because of these fees. Europe at least has far lower upper limits on these fees. I hope someone is able to replace the banks here one day.

Stripe has made it possible to accept Alipay on their processing platform:<p><a href="https:&#x2F;&#x2F;stripe.com&#x2F;docs&#x2F;sources&#x2F;alipay" rel="nofollow">https:&#x2F;&#x2F;stripe.com&#x2F;docs&#x2F;sources&#x2F;alipay</a>

Why are some Bloomberg article paywalled and some are not? As I am over the limit and I was expecting I cant read the article when I click through it.