A Last-Minute Presidential Ban on China-Based Payment Apps Puzzles Payments Experts

An executive order by President Donald Trump banning a pair of major Chinese payments apps comes in the waning days of his administration and may leave more questions than it answers, observers say.

The order, issued Tuesday, prohibits transactions on eight China-based apps, including the hugely popular Alipay and WeChat Pay digital wallets. The order’s intent is to protect U.S. consumer data from being harvested by Chinese authorities, according to the order’s language. Such data could potentially be used to “track the locations of federal employees and contractors, and build dossiers of personal information,” Trump said in the order.

But the action’s effect is likely to be considerably muted, observers say. For one thing, it doesn’t take effect until mid-February, nearly a month after Trump leaves office, leaving an open question whether the succeeding Biden administration would enforce it. Also, while some 4 million U.S. merchants accept Alipay, mostly from Chinese tourists, experts say the number of U.S. users of either Alipay or WeChat Pay is very small. Alipay, for example, was downloaded 207,000 times in the United States in 2020, according to data from the research site Sensor Tower, as quoted by The Wall Street Journal.

“This [executive order] will have almost no impact on U.S. retailers and merchants as usage of these two payment apps in the U.S. by U.S. citizens is extremely low. The impact will be on U.S. citizens visiting or doing business in China,” says Thad Peterson, a senior analyst at Aite Group, a Boston-based consulting firm.

Most experts contacted by Digital Transactions News contend the Biden administration is likely to quash the order, particularly if it is seen as complicating other negotiations with China. “Biden may not care to pick a fight over this when there are more consequential issues to deal with,” notes Aaron McPherson, an independent payments analyst.

Adds Aite’s Peterson: “I would be surprised if this wasn’t overturned quickly after the Biden administration is installed.  It punishes U.S. citizens and encourages China to look elsewhere for business relationships, which they’re already doing.”

Eric Grover, principal at Minden, Nev.-based consultancy Intrepid Ventures, agrees a reversal by the incoming administration is likely, but also sees a contrary possibility. “Biden’s perceived as soft on China. He just might therefore let it stand,” he says.

Alipay is a service offered by the Chinese conglomerate Ant Group Co., which has made forays into the U.S. payments market before, most notably when it offered $1.2 billion in May 2017 to acquire Dallas-based money-transfer network MoneyGram International Inc.  Fearing the deal would hand too much power in U.S. financial services to a foreign entity, federal authorities quashed the deal the following January. WeChat Pay is part of the giant Tencent Holdings Ltd. conglomerate. 

Trump in August issued an order similar to Tuesday’s ban prohibiting usage of the WeChat app along with China’s TikTok messaging app, again on the grounds that the apps posed a risk to the privacy of U.S. users’ data. Federal judges have blocked both bans.