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

bloomberg.com

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

#21

Post by PeterisP »

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.

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

#22

Post by dzink »

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.

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

#23

Post by s_dev »

kevin_b_er wrote: post #6

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.

>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.

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

#25

Post by khuey »

azinman2 wrote: post #24

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.

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

#26

Post by nneonneo »

PeterisP wrote: post #21

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 payme…

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.

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

#28

Post by aninhumer »

s_dev wrote: post #23
kevin_b_er wrote: post #6

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.

>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 am…

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)

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

#29

Post by gruez »

baq wrote: post #20
gruez wrote: post #17

Earlier quoted context omitted.

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?

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

#30

Post by tluyben2 »

gruez wrote: post #7

>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.
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