U.S. merchants prep for Trump's Chinese app ban, whether it sticks or not

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Thousands of U.S. merchants are weighing measures to freeze acceptance of Alipay and WeChat, two of the eight Chinese mobile payment apps that would be blocked if outgoing President Trump’s recent executive order goes into effect next month.

President Donald Trump issued the order last week, but it won't take effect until Feb. 19, giving President-elect Joe Biden a chance to rescind it. But with the chaos surrounding the transition of power dominating the national discussion, it's unclear what action — if any — Biden plans to take towards the companies affected by Trump's order.

Ant Group's Alipay appears to have the largest footprint in the U.S., in part because of its three-year-old partnership with First Data (now Fiserv) that originally aimed to reach 35,000 brick-and-mortar merchants serving millions of Chinese residents, temporary workers, students and tourists.

Prior to the pandemic, more than 3 million Chinese tourists were visiting the U.S. annually, but Alipay took a strong hit from coronavirus cutting off international travel.

Only 10,000 U.S. merchants currently accept Alipay, including Walgreens, CVS, Sephora, some department stores and many restaurants, Alipay representatives told PaymentsSource. Neiman Marcus said it stopped taking Alipay last year.

To compensate for the steep loss in payment volume when the pandemic curtailed travel, Alipay last year launched an initiative to encourage U.S. e-commerce merchants to add Alipay as a checkout option.

It's too soon to measure results of that effort, Alipay said.

Alipay's parent company Ant Group, meanwhile, is in the midst of restructuring itself after Chinese regulators recently scuttled the company's proposed IPO.

Given political uncertainty around whether the ban on Alipay will actually happen, most merchants are still in limbo and preparing for any scenario.

A spokesperson from Fiserv said the payment processor is monitoring the situation and will take appropriate action as needed.

Walgreens said in a statement it can turn off Alipay if necessary, based on government direction.

CVS, which in July announced it would accept Alipay at its 6,200 U.S. stores, declined to comment on steps it would need to take to block the payment option.

Flywire, a Boston-based payments platform that specializes in processing cross-border college tuition payments — with a strong base of consumers in China — has accepted Alipay for years, but a ban would have little effect on it at the moment, said Mike Massaro, Flywire’s CEO.

Chinese families tend to originate the sizable tuition payments at banks. Smaller payments Flywire handles via Alipay have also been reduced this year by the lower number of foreign students studying in the U.S. due to the pandemic, he said.

“Alipay is one of the payment options we provide, and we hope to be able to offer all payment methods, but if Alipay is frozen in the U.S., it wouldn’t have a big impact for us now,” Massaro said.

Other U.S. retailers that added Alipay in recent years include Saks Fifth Ave., Macy’s, Bloomingdale’s, Guess, Lacoste, and many airport shops operated by DFS Group.

Greensboro, N.C.-based Han Feng Group, which provides business services to 7,700 restaurants in 14 states, also was an early adopter of Alipay.

"The impact on Trump's ban on Alipay and WeChat at the physical POS likely will be limited," said Eric Grover, a principal with Intrepid Ventures.

Most Chinese citizens have multiple UnionPay credit cards, and those who travel are likely to have those cards cobranded with Mastercard and Visa, he said.

"The biggest impact on the ban will be on mobile and e-commerce, and best practice is to give buyers the ability to pay with the system they're most likely to want to use," Grover said.

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