China’s Payment Apps Give U.S. Bankers Nightmares | Hacker News Reader

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

bloomberg.com

147 pointsdismal2135 comments

The critical difference is that in China, the apps effectively are the banks, whereas in the US, regulatory capture ensures that the banks stay the banks and it's the app's problem to figure out how to interface with them.

The reason the banks are scared is not because "banks" are not involved. They're scared because these apps have successfully vertically integrated to become banks. This is the logical next step for Apple / Google Pay and I'm sure it has consumer banks shaking in their boots, because there'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.

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'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 / payment networks control the entire cycle from point-of-sale to deposit.

I'm not sure about the US, but in Canada, these companies would not be allowed to accept deposits or facilitate withdrawals; they could never "become banks". Our banking act and recent revisions are in place to protect a foreign entity from holding Canadian citizen's money hostage and shielding them from exterior economic impact (We fared very well in 2008 because of these regulations!).

The most they could do is be a fancy wrapper around the bank's own software.

>They're scared because these apps have successfully vertically integrated to become banks.

I'm not sure tech companies really want the core banking business, which is to lend money (taking on credit risk in the process) funded by deposits.

I can imagine Amazon doing it for smaller consumer purchases as they know their customers well. But who will make loans to SMEs and larger retail loans? Google and Apple? I doubt it.

Eventually interest rates will rise and then bad loans will increase, and tech companies will start to wonder if that's really the business they want to be in (like GE has been "wondering" for many years now).

And then there's the regulatory aspect. Do tech companies really want to be regulated as banks? I get the impression that they have daily run-ins with all sorts of regulators already and they're running scared.

Its still a doable business though, presumably its what Paypal and any payment processor wants to be, because getting paid mainly to do transactions is still not the biggest money earner and customers will appreciate a wholly integrated process instead of one fraught with different vendors and regulations.

Also presumably Alibaba and Tencent are earning quite a bit off their payments/banking and customers love it because they dont have to carry cash and do all the other steps etc. (talked to Chinese people about it).

I wonder if the roles of "payment network operator" and "credit provider" need to be as entwined as they are now

That's a good point. I think they are not nearly as entwined as they used to be (before Paypal) and that trend is going to continue.

It's not really the core banking business in the US - interest is only about 50% of income for large banks.

http://money.cnn.com/2017/02/22/investing/atm-overdraft-fees...

And check out page 38 of BoA's annual report: http://media.corporate-ir.net/media_files/IROL/71/71595/BOAM...

Interest income was $44.7 billion, non interest income (aka fees, trading, and services) was 42.6 billion.

Lending is still the biggest segment by far and some of the fees and charges are closely related to the lending business.

Also, most of the other segments are not exactly what I imagine tech companies will want to do either. In the case of BoA that includes the entire business of the former Merrill Lynch.

FYI Alibaba/Alipay has a range of loan and financial products. My wife’s Taobao business does well, and so she’s eligible for huge, insane loans on Alipay. On the other side, micro-loans to fund consumer purchases are also available.

Also, aside from traditional lending, Alipay and Wechat are both competing to basically own all social and consumption data - in a sense I’d agree they don’t want to become traditional banks: they want to create closed payment/purchasing/social systems where they can take cuts from every step of the process.

It makes sense. We're seeing more and more "middle men" being removed from the economy (travel agents, publishers, broadcasters, retailers); banks are about as pure "middle men" as you can imagine. Whether this is good or bad isn't as relevant as whether or not it's inevitable and, long term, I think it is.

Everybody is a middleman when the robots take over, so yes.

"The critical difference is that in China, the apps effectively are the banks, whereas in the US, regulatory capture ensures that the banks stay the banks and it's the app's problem to figure out how to interface with them."

Are you sure it's that? Or is it that the apps don't want to have the responsibility of safeguarding people's money? Cause really, payments and money are things where you really do not want to "move fast and break things".

This all depends whether you can shift the risk. It is fine to break things if you have managed to get insurance to cover the downside.

I would phrase that another way. It's fine to break things if you can make whole the people who are negatively affected by breaking things. Someone getting their money returned after it was stolen from your startup bank is one thing, but that person missing their car payment and having their car repo'ed because of that missing money, and thus not being able to make it to work and getting fired is another.

Exactly- I was trying, dryly, to be tongue in cheek. As the example you gave illustrates well, covering risk almost never includes second order consequences, it is part of the “limited liability” that companies get. Unfortunately, customers tend not to be informed well enough to reason through these possibilities up front. We never know exactly what will break, or how we might be effected by that breakage.

The critical difference is that in China, the apps effectively are the banks, whereas in the US, regulatory capture ensures that the banks stay the banks and it's the app's problem to figure out how to interface with them.

My wife works in banking, for a small local bank. The regulations are heavily skewed against smaller banks. Regulations around consumer mortgages seem to be designed to keep smaller banks out. Unless you have the resources to engage in sizeable software projects, you will have to write your own software, spend a lot of money on software licensing, or engage in a lot of manual work while risking draconian penalties for little mistakes.

So regulatory capture doesn't just mean rigging the game for banks. It's only the large corporations that do the rigging and gain the benefit.

Tech needs to figure out how to combine the power of small community banks. Small community banks can only survive through having superior local intelligence. That superior local intelligence is worth a heck of a lot in aggregate.

smaller banks also provide protection against 'too big to fail' syndrome. They won't over leverage risk.

If they don't actually own the mortgages that they issue, and instead sell them on the credit markets, then neither big nor small banks overleverage risk.

As I understand it, it doesn't matter if they are Chase, or BECU - most banks don't actually own any of the mortgages they issue.

The problem in 2008 was the fraud, the irrational exuberance, and really dumb investments by the investment branches of a few investment banks. The retail arm of, say, Wells Fargo, which issued a whole bunch of shitty mortgages was fine.

Whether or not you think that investment branches of banks deserve to be bailed out is an exercise for the reader.

Not exactly. The savings and loans crises of the 80's was driven by a sector of traditionally small, community banks, fueled by deregulation.

Specifically, what you explained stoked the fire, but what poured gas on it and simultaneously kicked the embers about the room, was Rudolf Guiliani taking RICO to make his case against Mike Milken, actually first of all Mike's far more vulnerable brother was indicted, but that aside Guiliani forced Drexel to shut it's trading desks, which drained the market for the junk bonds which had allowed so many tiny thrifts to engorge themselves, and without any mark to market -the whole market consisting of Drexel making two ways all on it's lonesome (who else had a clue what was in those bonds?) - the multitude of vastly bloated regional S&L's couldn't post their accounts, and simultaneously all went belly up.

Not being funny, but Guiliani forced the whole mortgage banking business into insolvency to make a point that some still think was Vendetta. Whatever the case, Guiliani forced a vast capital market to halt, for no reason I've ever learned, and handed a four trillion dollar bill to the taxpayer, for kicks. No wonder Trump likes his advice.

All regulations are skewed against smaller companies. There's a reason the US has a vibrant startup culture, and Europe doesn't.

>This is the logical next step for Apple / Google Pay and I'm sure it has consumer banks shaking in their boots, because there's no way they can outcompete those companies in tech.

Google and Apple don't have to (and the banks won't get to) compete on tech if they enter the space. They'll compete on their ability to vertically integrate. Good news for google and apple, they're already in every pocket.

Anecdotally, I've only seen a few people using apple pay in the UK. Everyone now has contactless card (which you just tap on the machine to pay almost instantly), which as very popular.

A lot of places seem to support apple pay, but it's much less convenient than contactless (obviously some people disagree).

Huh? Apple Pay uses the exact same NFC tech as contactless.

Why would I want to pull my phone, unlock it, if I can just tap my card instead?

If you have more than one contactless card, you’ll need to remove it from your wallet to pay. That’s slower (at least for me) than pulling out my phone, thumb primed on Touch ID so it’s already authenticated before I tap.

Plus, if my card is stolen, it can’t be abused on multiple cheap contactless purchases. Sure the bank will refund, but it’s still a pain of a process to go through, especially if the bank pushes back at all.

The beauty of China-style massive adoption of mobile payments is leaving the house without taking your cards or wallet or cash with you.

So kind of agreeing with you - Apple Pay is great because then I don’t need to take my card (whereas I’ll always take my phone) and it has added security of Face Recognition.

However, the poor adoption (ie, all those places that don’t have contactless, don’t take cards, money transfers to friends, parking meters....). Contactless vs ApplePay is 50:50.

I’m one of those that disagree :)

I prefer Apple Pay over contactless as you can often go over the £30 limit of contactless. Eg I’ve spent £80+ at Waitrose and paid using Apple Pay. Plus it is more secure- you must authenticate to use it- and that added security doesn’t take long at all (under 1 second to Touch ID). I’ve got 3 cards (two debit, one credit) linked to Apple Pay.

I only have one contactless card, which is just to replace my Oyster card for tube/public transport travel, and that’s only because it’s quicker to pay with when going through the gates. I explicitly called the banks and told them to send me non-contactless versions of all my other cards.

Oh, and Apple Pay doesn’t suffer from card clash. Which is one of the other reasons why I only have one contactless card in my wallet.

Another advantage is that you don't add yet another entity knowing what you do with your life in the mix. The bank already has the information, and the shop. I don't really want apple/google/whatever to append to the stock pile of stuff they know about me: my consumption habits, the money I got and the places I visit despite the fact my geoloc is off.

The massive centralization of our life is a huge problem.

Like we said "don't give everything to facebook" 10 years ago and people only wake up now, I wish people realized it's not about a particular brand. It's a general advice.

The worst part is that the power you give to them is invisible, so it doesn't seem that much. It feels harmless. But the potential for controlling ones life is huge.

as i understand it second-hand, you can effectively no longer get a federal charter to be a bank if that’s not your sole purpose, because of the high regulatory burden that comes with it.

nordstrom, for example, is/owns a bank (until recently, it seems it’s been sold to charles schwab) but that’s because they got their charter in the 90’s before the regulatory burden became prohibitive (and was grandfathered in).

so i’m not sure tech companies can easily verticalize into banking.

I think you've nailed the way Richard Fairbanks (CEO of Capital One) thinks with this part:

>it has consumer banks shaking in their boots, because there's no way they can outcompete those companies in tech. So instead they focus on regulatory capture

That's why COF is doing the whole "we're a tech company that also happens to be a bank" spiel. They are doing their best to back that up, as well. Lots of modern practices and of course they're all in on Cloud.

From India here. Same can be said for India. I do my all banking transactions from my phone. Also there are couple of banks who are only app based like DBS. I rarely visit bank.

The banks have been pushing for a cashless society for awhile now.

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't be them getting the 2-3%? Cry me a river.

Hmm, most other countries have free transfers between bank accounts. It's just the US (maybe a few others) still stuck in the stone age.

you can transfer free between friends using services like paypal, doesn't that count?

paypal isn't a bank, though.

GP mentioned:

>free transfers between bank accounts

does it really matter if it was done through some third party service?

Absolutely, given that Paypal can freeze your money indefinitely for arbitrary reasons (and has a long history of doing so).

Does it for consumers? I thought it’s only for sellers. That’s also been my experience.

Why put another potentially malicious, rent seeking third-party between you and your friend's banks?

PayPal is registered as a bank in the EU, in Luxembourg if I am not mistaken.

ACH bank transfers are free in the US too, just takes a few days. Personal transfers with Venmo or paypal are free too in most cases. The fees are for credit cards which make up almost all online transactions and have fees everywhere in the world.

Lots of other countries have debit cards linked to accounts with standing credit, instead of the "credit card" that you pay off every month.

These debit cards very low fees, sometimes they work as both debit and visa card, so you can use them abroad too.

We have debit cards in the US too... that’s how apps like Venmo work.

Who gets the seller fees?

In the US, you only get a piece of the action if you use a credit card. Otherwise you still pay the higher, transaction-fee-included price, but you don't get any part of the transaction fee.

I see many stores with fees for using foreign credit cards. Like ~1 USD..

Or I guess the seller pockets the fee.

> ACH bank transfers are free in the US too, just takes a few days.

One-day ACH has been standardized and has begun to be rolled out.

Perhaps, but in the UK I can do instant bank transfers for free. Very useful for settling small debts between friends and such things.

The EU limited fees to .3% on credit and .2% on debit cards, and made charging the consumer card fees illegal everywhere though. That's a big improvement on what was otherwise ~3%

Still not as ubiquitous as it should be.

In NZ for example, folks have their bank account # proudly displayed over a plate of cookies for purchase at 25 cents on a whim.

Yup. Woke up this morning, FB message with a spreadsheet. Some friends going on holiday together, one has taken responsibility for the house we're renting, got the bill today, cut it up, sent it out. I copy-posted the amount into a web form from my bank and it was in their account later this morning at zero cost to either of us.

It still vexes me that I can't instantly transfer money from my bank to a friend's account without paying, or using a third-party like Venmo or Paypal.

Most banks are using Zelle now, all but instant in my experience

Zelle is restrictive, daily limits are quite low. It's also not always instant, depends on how much risk your bank considers you.

I ran into this issue today. Frustratingly low limits ($1000) for my bank.

Also, Zelle is a third party, but one owned by a bank collective so it gets a deeper integration. Potato, Potahto.

>The banks have been pushing for a cashless society for awhile now.

Since the first loan was regulated banks have been pushing for a cashless society. Your comment is very much an understatement. It is the holy grail of the financial industry.

Because of the liquidity ratio. Banks are supposed to have 10% of their total lending in cash. This is to prevent a run on the bank.

No cash means banks can lend an infinite amount of money as they aren't bound to the liquidity ratio.

Basically it removes the ceiling from what a bank can earn as there can never be a run on the bank.

I think you're conflating cash meaning the physical currency and cash meaning the liquid asset here?

A cashless society is about the former, and as far as I know, the 10% limit is about the latter?

(EDIT: I believe in some systems the banks do technically have physical currency in the form of special high value notes, but they're not really cash in any practical sense)

>No cash means banks can lend an infinite amount of money as they aren't bound to the liquidity ratio.

that's not how fractional reserve works. banks have capital requirements (some of which may be cash), not cash requirements. moreover, even if it was somehow cash requirements, they're not obligated to hold physical cash.

To all the downvoters of this persons comment quibbling about the word 'cash' - please focus on the general concept of 'how can you have a bank run without a commodity store of value outside of the bank account itself' please...

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.

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.

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.

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.

These will be broken down one at a time.

$2 million in reserves seem like peanuts, any serious attempt to enter this business would imply investing enough money that mere $2 million is just a reasonable cost of doing business. Paypal needed $200m of venture capital to get started, a $2m requirement isn't prohibitive.

As for the delay, a common practice to enter a new market in finance is to "just" buy an existing bank that has all the required permits and all the legal and technical connections to the settlement infrastructure. There are thousands of banks, many of them small and relatively affordable for any investor trying to make a serious entry into the market. E.g. if some foreign financial company would want to start business in a new market, they usually would not start from scratch and bother with the licensing delays but buy some existing institution to absorb, rebrand and grow. If Amazon or Google or a new VC-backed company would want to enter the market, they're likely to do the same. If Amazon can spend a dozen billion on WholeFoods, then spending ten or fifty million on a small bank to get a banking operation running much faster is just natural, and not even a waste of money, as they'd likely need tens of millions of capital reserves anyway to justify holding immense amounts of customer money.

Buying a bank exposes you to being regulated and restricted as one, just as doing business on Government contracts adds a bunch of friction and overhead to every transaction and to your business (ask Google/Alphabet). The key to mass payments is lower friction per payment. Tech can fix a lot of things that regulation had to be used to prevent, but you have to pay the regulatory cost before you can remove the requirement for it. It's a bit of a Catch 22 in the US.

Even the first line of illustration is kind of misleading - "Paycheck is deposited into employee's bank account"; there'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 'check' has no colloquial relation to your salary.

The main difference for accessibility of such payments is that, unlike cards, there'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.

I believe “paycheck” is now understood as a catch-all term for the periodic payment of wages or salary. It doesn’t have to mean a literal check - paychecks can be direct-deposited too, in which case they go through precisely the bank-to-bank transfer that you mention.

Remember that we still call our pocket supercomputers "phones".

Also we keep thinking the important thing is that they're computers but actually the important thing is the Network. So in a way phones (which are all about being connected to the network) might be the best term anyway even though we rarely use them to make a voice call.

Again, only in America. They're "mobiles" many places.

... which is short for mobile phone.

When I was in Korea, the term "handset" seemed ubiquitous among the English-speaking people I interacted with. This is even stranger because, as I understand it, the Korean term is a transliteration of the English "smartphone", so I don't know where people were getting "handset" from.

Many, many small businesses in the US still issue paper payroll checks.

This has been like this for at least 2 years over there now. This is facebook/whatsapp best'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.

> stop living off consumer data and start living off an actual service industry.

the apps in china boomed due to the fact that credit cards weren't popular nor available at the time, and the opportunity for the app (wechat) to become the payment method presented itself.

This can't happen in the western world, because credit cards are so ubiquitous, and displacing it is high neigh impossible.

This.

Also those payment apps are like PayPal in the sense it provides very little fraud detection and protection. You are petty much on your own. They process almost no chargebacks, for example.

The Chinese consumers have vastly different expectations when it comes to money because the lack of protection throughout history. To them, it looks very unsafe to just swipe a card without a PIN, and chargeback is an alien concept.

Background on the two. Alipay started similar to eBay, serving e-commerce, and WeChat payments captured the P2P market. Both have expanded to physical retail.

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.

The basic design was ACH money into the wallet, transfer money between balances for ultra low cost (1%), ACH money out of the wallet.

The difficulties are regulation. Doing this would make you a money service business and banks really don't want to touch that. Plus it costs a nice chunk of change to register in every state.

If card processing companies are taking around 3% + 30 cents of each transaction, they'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.

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.

The claim is that the fees primarily cover fraud and fund various consumer protections. It would be interesting to know how much of the 3% that actually is.

I bet a lot of those go to rewards. Also, cards are pretty insecure. Maybe a phone with a lock on it to prevent physical theft and use, and all the data you would have associated with each transaction would make a great fraud detection system.

> I bet a lot of those go to rewards.

This is the kind of thing you should know off the top of your head if you're interested in competing with them.

Yea, that's one piece of information I haven't found. I'll have to look if it's in SEC filings for credit card companies.

> Credit cards are our primary form of digital money and their fees are excessive. The basic design was ACH money into the wallet, transfer money between balances for ultra low cost (1%), ACH money out of the wallet.

2% (credit card fee) is "excessive", but 1% is "ultra (!) low cost"?

The fixed transaction cost is really what eats up low value transactions. 30 cent fee means anything below 30 cents is unusable. A 2 percent fee with no fixed cost would be fine with me. If you know of a processor that does this, let me know.

That’s a fair point, I had not considered the micro transaction aspect.

So its more expensive than debit cards (0.05% + 21c) to the merchants, and has no reward incentive for the consumer (1-1.5% back in cash or points is typical). Who was it supposed to appeal to?

there are a couple important things to consider here

- 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

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.

They will reimburse you for fraud, after fraud already happens. It would be much better if they worked proactively to prevent fraud. Then they'd be offering a service for a fee, rather than, essentially, selling insurance.

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.

Should Apple Pay be on that list? AFAIK, it's not possible to pay someone directly Apple Pay to Apple Pay. It's more like the standard stand-in for a credit card.

Don't get me wrong, I'd love for Apple Pay to be that convenient, but it's not there yet.

Ed: changed easy-to-use to convenient

You can send money through iMessage with Apple Pay Cash. You can even use an Apple Watch or Siri to send person to person cash transfers.

https://support.apple.com/en-us/HT207875

It is now with Apple Pay Cash, as the sibling comment pointed out.

HOWEVER, that’s backed by a real bank account at a real bank Apple chose for the purpose (in the US). Transfers involving credit (paying as credit card or using a credit card to move money in) still hit the standard fee. Other transfers are just normal US debit transfers.

So Apple Pay Cash isn’t bypassing anything, at least in the US. It’s further entrenching them. Don’t know how it works in other countries.

Venmo takes a loss just to get people into the PayPal ecosystem. The other P2P options are just there in hopes they take off. My understanding of Apple pay was that it's just a pass through for credit card transactions.

Those P2P apps need to branch into physical retail.

How do these systems compare with Mpesa, which I'm given to understand is big in Africa?

Just a note that you can only have max $1,000 in an Mpesa account.

That would be totally fine for 99% of my purchases.

All the payment stuff aside, how does money get into the Alipay/Wechat ecosystem? How do I add money to the account?

In the US, where the single purpose Starbucks wallet is outpacing Apple Pay (https://techcrunch.com/2018/05/22/starbuckss-mobile-payment-...), most users pay into the thing with a credit card, so the banks still get their cut. Sure, they aren't getting the cut when it's spent on coffee like they would with a credit card, but in some ways, they already got it on the front end.

Is the bank totally out of the picture in the Ali/Wec version? Do people put cash money into Ali/Wec via top-up shops or other experiences? Direct deposit salary? Or is it a free transfer from a bank?

You sign up to the Alipay/Wepay services using a bank card. Money is transferred from the card to the payment account using the transfer credit interface in the app.

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

Its interesting how they didn'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'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.

This is basically Paypal's dream scenario to become a bank because they already deal with the regulatory stuff but don't get the full money earning potential of a bank.

PayPal is already a bank. From wikipedia 'Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank'

I meant bank in the USA, although in many ways financial regulations in the EU should be more restrictive and complex due to member state issues so interesting that it hasn't done so in the US.

>Western bankers and credit-card executives who travel to China keep returning with the same anxiety: Payments can happen cheaply and easily without them.

but there are plenty of "bank -> wallet -> merchant" 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.

The anxiety probably stems from the scale of wechat pay; you can pay basically everywhere with it now. Even in places that do not officially accept it, the store clerk will usually just accept on his private phone and put money in the till for you.

how's that any different than payment processors like square, which allows just anyone with a cellphone onto their platform?

>the store clerk will usually just accept on his private phone and put money in the till for you

is that really a thing people do? the risk-reward ratio is all off. you take on the risk of possibly getting a chargeback (maybe the phone/account was stolen), in exchange for... nothing? it's not like the cashier is getting paid commissions.

Alipay and WeChat pay don't do chargeback, so where's the risk to the clerk? They're mainly replacing cash / direct debit, which don't provide chargeback either.

Slightly offtopic; how easy is it to do chargebacks over there as it sounds trivially easy? On my dutch and spanish creditcards I have tried chargebacks but it is a royal pain in the ass; writing letters (in the actual post, not digitally) and providing proof for obvious things like hotel double charge.

As an American my experience has been clicking on a button on my account statement that says "Report suspicious" and then getting a refund in two days

In China you can spend Alipay/WeChat at offline as well as online merchants. And not just larger merchants but also at micro-businesses like mobile food stalls and hole in the wall eateries. Because both the equipment and fees for the merchant are much cheaper than those required for traditional credit/debit card processing.

Exactly - WeChat is used for everything - homeless people on the street have WeChat QR codes - that gives you an idea how cheap that process is.

Here in NZ I pay in cash (I kind of like the idea of an anonymous payment system) but these days younger cashiers often trigger ATM payment while I'm standing there holding cash and have to reach around and cancel it on the ATM terminal - it's the same in China but more so

cash is not perfectly anonymous. cash taken out of an ATM has tracking numbers assigned to you.

As long as banks get the FDIC guarantee while American WeChat-type competitors don't, they'll be fine.

Only among those well-enough versed in history and consequence.

also, credit cards have consumer protection by law in cases of fraud, "wallet" type services like alipay? not so much.

While there is no guarantee by law, these companies do cover fraud with their vast reserves. Ofcourse an economic downturn could change that.

I'd rather have fraud protection mandated by law, than provided as a good will gesture by the corporation. should there be a disagreement between me and the company, the former provides me with legal recourse, whereas the best I can hope for with the latter is a social media shitstorm.

Ofcourse, just saying how it is and that it is pretty well accepted by 100s of millions of people.

Most purchases on those platforms are for consumables, food, event tickets, etc.

Two different products tbh, we all throw it into (retail) 'banking' but, payment processing and savings/investments are different products that needn't exist under the same umbrella.

Moreover, the median American has around $3000 in his bank account and a lot of people have negative cash balances. FDIC insurance isn't a big deal in the lives of many millions of people. And even if it was, there's no reason you can't have a bank account with FDIC insurance for your cash savings, and a WeChat like payment system for day to day payment processing.

How exactly does WeChat make money? I was under the impression that banks ate the cost of poor customers with a checking account and generated revenue from individuals who could use their money in other avenues. If anything WeChat might trim poorer individuals from the balance sheet for other banks

If money has to flow in the economy through limited hubs then hubs automatically grow rich.

It should be a fundamental right in the capitalist country, right to process payment for any party. Today, we need special license/approval for this which limits the "access to disrupt" 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.

Is this the best a capitalist country may offer?

I think the fear is that without this "license", you would have a bunch of "banks" that collect customers and then exit scheme to the Southeast Asia similar to the frequent ICO scams you see with cryptocurrencies

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.

Because we like our 2% credit card rewards.

After and afternoons worth of research I've manged to get ~4% back on every purchase. As long as you have a decent credit sore you can really optimize your "cashback" and beat the fees. If you're one of the churner people I'm sure you could do much better

How do you get 4% cash back without using any of those airline points? I mean straight up cash back

Chase Freedom and Discover IT have 5% rotating, I also normally redeem my point for travel and get 1.5x multiplier for that

What card gives you 4%? And how long will that last? Just wait until interest rates start to climb...

I opened years ago a Schwab checking account with 4% interest. Now it’s something like 0.04%.

Regardless, the merchant never got their 3-4% back! Which means everyone has to pay 3% more for their items, cash or credit card.

"I don't know why our society hasn't realized that everything is X% more expensive specifically because of these [things that are required to pay for the service you're getting]"

There is no law that says money must be exchanged over credit cards that drain 3% from the merchant. Aside from checks, cash, and money orders, the Alipay example from the article shows that alternatives can and do exist. Europe also has credit cards, yet the government caps the fees far lower. It doesn’t have to be this way.

Personally I avoid, and eventually forget, places that don't take credit cards. Also, dealing with huge piles of cash is a huge pain. As a business owner, I'd go cashless if I could just to avoid the overhead of dealing with trips to the bank, getting coins, etc.

Stripe has made it possible to accept Alipay on their processing platform:

https://stripe.com/docs/sources/alipay

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.

I have noticed that Bloomberg won't wall off their longform or graphic-design articles, I'm thinking because they're from Businessweek and not regular news you could get on the Bloomberg Terminal.

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