Having taken their position at the vanguard of the world’s mobile payment revolution, China’s tech giants are understandably attracting the attention of businesses around the globe. Mobile transactions in the country have already eclipsed those in the United States, totaling US$12.8 trillion in 2016, compared with a paltry US$49.3 billion the same year in the US. And they have rewritten the rules of financial transactions in the process.
It is not the scale of China’s mobile payments business that has captivated – and horrified – America’s big banks. The top two mobile payment platforms in China, Alibaba’s Alipay and Tencent’s WeChat, which account for over 90% of transactions, handle payments without banks getting a piece of the action.
Losing the cut of transaction fees, of which banks get the largest share in the US, would only be part of the problem should such a model make its way across the globe to the US, according to a report in Bloomberg on Wednesday. The use of cash itself, and the fees associated with checking accounts, is another important source of revenue for banks.
“This is going to be the battle of all time – like who dominates all those services – and it’s still not known,” JPMorgan’s Jamie Dimon was quoted as saying in February. “Everyone wants to be the place that is the one place you go to do that.”
In the US, banks still have advantages that their Chinese counterparts did not have. A mere decade ago, before the mobile payments boom, credit cards in China had yet to play a role anywhere close to what has been seen in the US for generations. Up until recently, most businesses were cash only. In the US banks have built up long-standing relationships with customers that weren’t seen in China. Nonetheless, billions in revenue are at stake, and Amazon is knocking on the door.