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TikTok parent ByteDance has partnered with J.P. Morgan to build a real-time payments infrastructure as the firm looks to leverage local instant clearing systems to reduce costs and enhance user experience.
The new real-time payments infrastructure, built into ByteDance’s platform, can be connected to local clearing systems, allowing TikTok users, content producers and influencers to be paid instantaneously and directly into their bank accounts.
It replaces TikTok’s previous payment process routed through e-wallets, which require users to manually move the payments into their respective bank accounts.
The platform also has automated clearing house (ACH) capabilities for the wider EMEA markets where real-time payment connectivity is not enabled.
This allows users to transfer payments directly into their bank accounts across local low-value clearing systems, which lowers costs for both the firm and its users, a case study published by J.P. Morgan states.
Due to the access to multiple local clearing networks, the company could expand into more than 30 markets that cover millions more users.
TikTok has 1bn active users worldwide, including around 200m people in the US and Europe. These two jurisdictions have become the first markets where the new payment system has been introduced.
In addition, the company has replaced its host-to-host bank connectivity with application programming interfaces (APIs) that allow real-time exchange of data between ByteDance and J.P. Morgan to enable firms and users to check the status of their payments in real time.
The payment infrastructure reduced ByteDance’s transaction costs ten-fold and reduced the settlement cycle from two business days to instant, a payments executive at ByteDance commented.
“By harnessing the power of technologies like APIs and the real-time infrastructure that we have built, ByteDance is able to both streamline its operations as well as deliver on its number one priority of providing an exceptional user experience for its content producers and influencers worldwide,” said Sridhar Kanthadai, head of payments for Asia Pacific at J.P. Morgan.
In October, the Financial Times reported that TikTok has also teamed up with TalkShopLive to launch live shopping in North America that allows brands, retailers and social influencers to put shopping links on the screens of TikTok users.
Intense US-China relationship
The partnership comes as the relationship between the United States and China has been heating up recently.
According to intelligence and business experts cited by Forbes, the deal stands out because of the “current geopolitical climate” and “widespread fears” about TikTok’s handling of data, due to its ties to China.
An increasing number of Congressmen, including Senate Intelligence Committee chairman Mark Warner (D-VA) and Treasury Secretary Janet Yellen, have spoken out against TikTok.
In December, more than a dozen US states passed bans on using TikTok on government-issued devices, while the Senate voted to pass a bill introducing a similar ban on federal agency devices.
The company is currently under investigation by the Treasury's Committee on Foreign Investment in the US (CFIUS) over national security concerns.
In this environment, the social media giant’s entry into payments may add to these concerns, according to Forbes, while it may also bring clear benefits for the parties involved in the partnership.
With $3.3trn in assets, J.P. Morgan Chase is the largest bank in the United States.
“J.P. Morgan is such a well-established, well-networked, very influential stakeholder in the US, and cooperating with a major player in the US makes the company look more trustworthy,” the newswire cited Xiaomeng Lu, director at Eurasia Group, as saying.
By partnering with such a highly credible partner, the Chinese firm may help improve its reputation in the US.
