In China, people use mobile payment app services owned by Alibaba and Tencent to do almost everything, and U.S. banks are terrified of these Chinese payment apps!

The Chinese chat, shop, send money to each other, and even make purchases in physical stores, and the country is becoming cashless!

Here’s the scary thing for American finance executives — the banks never get a cut!

Chinese Bank Accounts

In fact, many Chinese don’t even have bank accounts. China is among the growing number of countries showing that payments can happen cheaply and easily without banks or credit cards.

In contrast, U.S. consumers still rely on banks for most of their purchases. Even mobile payments made through apps like Apple Pay, Uber, or Venmo, are tied to the users cards or bank accounts. That all adds up to a feast of fees for many of the companies that handle and process payments.

U.S. Bank Fees

Did you know that for a typical $100 credit card purchase in the U.S., $97.25 goes to the merchant and the rest is split between issuing banks, payment processors, the merchant’s bank and card networks? Those small slices add up to billions of dollars for banks every year.

Another reason U.S. banks are terrified of Chinese payment apps is that if apps were to grab market share in the U.S. at roughly the same rate as they have in China, banks would lose a projected $43 billion in revenue from one of their most profitable businesses, and that’s not the end of it.

Other Revenue Sources

Banks also generate revenue by dispensing cash and administering checking accounts. If payment apps were to replace paper money and offer alternatives to regular bank accounts — as they increasingly have in China — other sources of income could take a hit. Checking accounts alone generate $3 billion in bank fees in the U.S.


Whether or not you have access to a bank or not, being able to make or receive payments through your phone is an obvious advantage — as “Alipay” and “WeChat Pay” have demonstrated in China and that’s the challenge facing traditional banks, as the evolution of mobile payment systems gains momentum.

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