{"id":1220,"date":"2019-11-04T01:49:58","date_gmt":"2019-11-04T01:49:58","guid":{"rendered":"https:\/\/jobbinghood.com\/finance\/2019\/11\/04\/credit-cards-have-gone-out-of-style-in-china-will-the-u-s-be-far-behind\/"},"modified":"2019-11-04T01:49:58","modified_gmt":"2019-11-04T01:49:58","slug":"credit-cards-have-gone-out-of-style-in-china-will-the-u-s-be-far-behind","status":"publish","type":"post","link":"https:\/\/jobbinghood.com\/magazine\/2019\/11\/04\/credit-cards-have-gone-out-of-style-in-china-will-the-u-s-be-far-behind\/","title":{"rendered":"Credit cards have gone out of style in China \u2014 will the U.S. be far behind?"},"content":{"rendered":"

[ad_1]
\n<\/p>\n

\n

This story has been updated with a more accurate count of Chinese consumers using social media to pay.<\/p>\n

<\/p>\n
\n \"\"\/
\n
\n Getty Images<\/cite>
\n \n <\/div>\n


\n
\n <\/figure>\n

Imagine opening Instagram not to post a photo or comment on someone\u2019s story, but instead to pay for your groceries.<\/p>\n

That\u2019s what more than 1 billion people in China do. <\/p>\n

Except instead of using Instagram, Twitter or other popular social media outlets in the U.S., they open up WeChatPay and Alipay to scan QR codes to pay for goods in place of a traditional checkout.<\/p>\n

WeChatPay, akin to Facebook Messenger, was developed by Tencent
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n TCEHY, +1.46%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0, the Chinese equivalent of Facebook
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n FB, +1.03%<\/span><\/a><\/span>.
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n AliPay was developed by Alibaba
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n BABA, -0.12%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0, the Chinese equivalent of Amazon
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n AMZN, +0.83%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n . Together these two platforms account for $41 trillion in transactions annually. <\/p>\n

Their exploding popularity has saved Chinese merchants nearly 2% of gross revenue that otherwise would have gone to paying credit-card processing fees. On top of which, many retailers have stopped accepting credit cards as a form of payment. <\/p>\n

Could that happen in the U.S.?<\/p>\n

For the time being, cash is still king in the U.S.<\/p>\n

A report <\/a>published last year by the San Francisco Federal Reserve found that 55% of all transactions under $10 are paid for using cash. Furthermore, the average amount of cash Americans carry in their wallets has increased from $51 in 2015 to $59 by 2017.<\/p>\n

2017 was the first year that U.S. consumers used credit and debit cards for purchases between $10-$24.99 at a higher rate than cash, according to the report.<\/p>\n

The processing fees they incur from these small purchases can quickly add up. As a result, vendors are introducing their own digital payment platforms to avoid paying processing fees.<\/p>\n

Consumers are more inclined to use these payment platforms if there is a monetary incentive, Aaron Klein, policy director at the Center on Regulation and Markets at Brookings, said.<\/p>\n

For instance, Starbucks
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n SBUX, -1.60%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0 has successfully enticed more than 16 million Americans to make purchases using Starbucks reward cards or gift cards as opposed to credit cards. Until they purchase goods using their cards, Starbucks has access to a pool of interest-free loans worth nearly $1.6 billion, as indicated on the company\u2019s most recent earnings report.<\/p>\n

\u201cWhen you buy a drink from Starbucks, and you pay five bucks it could easily cost Starbucks 40 to 50 cents in credit-card processing,\u201d Klein said. \u201cAnd so rather than do that each transaction, they encourage you to upload $50 so they incur the fee once. Then you buy your 10 coffees that way and they give you a free 11th coffee, which costs them relatively little.\u201d<\/p>\n

Like Starbucks, several other companies have developed their own digital payment processing platforms. Earlier this week Uber
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n UBER, -0.41%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0announced a new platform, Uber Money<\/a>. <\/p>\n

According to the company, Uber Money will make it easier and faster for drivers to get paid by opening an Uber debit account. They\u2019ll also be entitled to 3% to 6% cash back on gasoline purchases made using their Uber debit card.<\/p>\n

\u201cThese things are very prevalent in society but they\u2019re not being treated like money. You can\u2019t use your Starbucks gift card at McDonald\u2019s,\u201d Klein said.<\/p>\n

The same incentives for switching over to a digitized zero-fee payment processing platform exist in the U.S. but have not become the new normal.<\/p>\n

In Klein\u2019s view Americans are unlikely to adopt universal payment platforms like WeChat and Alipay because \u201cthere are simply not enough funds available to make an offer to these consumers that would entice them to give up their platinum or sapphire card,\u201d he wrote in a recent Brookings report<\/a> on digital payments.<\/p>\n

\u201cNot everybody is using credit-card rewards,\u201d said Brian Peters, executive director of the Financial Innovation Now coalition that includes Amazon, Apple
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n AAPL, +2.84%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0, Alphabet
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n GOOGL, +1.07%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0and PayPal
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n PYPL, +0.85%<\/span><\/a><\/span>
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n
\n \u00a0. \u201cParticularly the under-served don\u2019t get rewards now and are looking for the most convenient payment process right now.\u201d<\/p>\n

That said, Peters commented that he doesn\u2019t see technology companies taking on the role of banks.<\/p>\n

\u201cI talk to these companies all the time and they tell me it\u2019s not their business, they\u2019re not trying to solve for what the banks do,\u201d he said. <\/p>\n

Ultimately Peters said he\u2019s \u201cskeptical that we ever end up with a uniform payment in the U.S.\u201d, but envisions a future where more tech companies partner with established financial corporations. <\/p>\n

On the contrary, Brian Riley, director of credit advisory service at Mercator Advisory Group, believes that U.S. consumers will eventually hop on the Alipay or WeChatPay train.<\/p>\n

\u201cAlipay already has a toehold in North America with Tmall,\u201d a smaller scale version of Amazon, he said. \u201cWePayChat has some privacy concerns in the Asian market which do not play well in the U.S.\u201d<\/p>\n

Related<\/strong>: This Alibaba business could be its next big moneymaker<\/a><\/p>\n

In addition to China, Alipay has also gained a lot of traction in Latin America, he said.<\/p>\n

\u201cIt is hard for them to concurrently move into the U.S. market and face strong competitors such as Chase, Amazon, and PayPal,\u201d Riley said adding that \u201cwith the U.S.-China tariff issues, timing is not right.\u201d<\/p>\n

\u201cBut, sooner or later, we will see them here,\u201d Riley said.<\/p>\n

\t\t\t\t<\/p><\/div>\n

[ad_2]
<\/p>\n","protected":false},"excerpt":{"rendered":"

[ad_1] This story has been updated with a more accurate count of Chinese consumers using social media to pay. Getty Images Imagine opening Instagram not to post a photo or comment on someone\u2019s story, but instead to pay for your groceries. That\u2019s what more than 1 billion people in China do. Except […]<\/p>\n","protected":false},"author":348,"featured_media":1221,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-1220","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured"],"_links":{"self":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/1220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/users\/348"}],"replies":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/comments?post=1220"}],"version-history":[{"count":0,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/posts\/1220\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media\/1221"}],"wp:attachment":[{"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/media?parent=1220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/categories?post=1220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jobbinghood.com\/magazine\/wp-json\/wp\/v2\/tags?post=1220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}