Mobile-Payments in the U.S. and China

Abstract

Mobile payment is a non-cash payment method that uses mobile terminals as a medium. The United States, the world’s most financially advanced country, has lagged far behind China in mobile payment innovation. The reasons for this phenomenon have not been well explained in past studies. This thesis examines and deeply analyzes the development history and lineage of the payment industry infrastructure - banking industry, payment clearing system, bank card industry, and the whole payment industry in the U.S. and China with a historical and comparative research approach, and comes up with four main factors that lead to the differences between the mobile payment industry in the U.S. and China. First, the high concentration of China’s banking industry and the singularity of the payment clearing system lowered the threshold for mobile payment startups to expand their business in the early stage. Second, the relative backwardness of China’s Internet and bank card industries has led the Chinese to move directly from cash payments to electronic payments, and the lack of supporting hardware has spawned innovation in QR code payments. Third, mobile payment is a natural multi-side platform model, and the endowment of Chinese innovators in e-commerce and social user "sides" plays a decisive role in the direction of innovation and the probability of success. Fourth, fees in the Chinese payments chain are much lower than in the U.S., reducing the incentive for stakeholders to impede industry change and objectively facilitating mobile payment innovation and development.