Bloomberg highlights how, unlike American fintech startups, Alipay and WeChat have cut out all banking intermediaries as people shop and send money back and forth. In the U.S., numerous incumbent firms feast on fees from handling and processing payments.
Alipay and WeChat have since swelled in popularity, boasting 520 million and 1 billion monthly active users, respectively. Consumers sent more than $2.9 trillion inside the two systems in 2016, equivalent to about half of all consumer goods sold in China, according to the payments consultancy Aite Group. In contrast, U.S. consumers still rely on banks for most non-cash payments—whether it’s by check, debit, credit or a growing number of other payment systems tied to their bank accounts. Connected to that is a universe of wallets and payments systems operated by the likes of PayPal Holdings Inc., Apple Inc. and Alphabet Inc.’s Google. From the perspective of merchants, too much of the U.S. system siphons off enormous amounts of money.