Non-Banks and Retail Payments: Innovations in China and the United States


Nicholas Borst

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January 8, 2015

Retail payment systems worldwide have historically been controlled by banks and card networks closely linked to banks. This paradigm is shifting as a variety of companies from outside the banking industry are entering the payments industry. Non-banks, also referred to as third-party payment companies, are increasingly participating in all aspects of the payment system, ranging from providing customer interfaces to back-end processing. Some non-banks have gone even farther, creating online payment services that bypass much of the existing payments infrastructure. These new services are fostering innovation and competition in the payments industry, but also have the potential to create new challenges for regulators seeking to ensure a stable national payment system.

This Asia Focus examines the role that non-banks play in retail payment systems, compares the structure of the retail payments industry in United States and China, and discusses potential risks to the financial system.