TikTok and payments, a match made on social media
- Gen Z’s popular haunt TikTok is abuzz with payments activity, surpassing $1 billion in global consumer spending through in-app purchases in Q1 2023.
- TikTok is looking to make a name for itself in the retail space in America as well, as it battles with the White House over concerns about its Chinese origins.
Gen Z’s popular haunt TikTok is abuzz with payments activity, surpassing $1 billion in global consumer spending through in-app purchases in Q1 2023, according to data. And the company expects to grow ecommerce further, through merchandising. To that end, TikTok is in early stages of talks with regulators to obtain a payments license in Indonesia. This license will allow the social media company to profit from transaction fees and compete with incumbents in the region, like Alibaba.
TikTok has also announced a partnership with Advance Intelligence Group, a fintech startup in Malaysia, that will enable the fintech’s Atome BNPL service on the platform. In the US and Europe, TikTok has been working with JP Morgan to build real-time payments infrastructure that now covers almost one-fifth of the social media platform’s 1 billion active users.
Currently, the platform primarily uses third-party payment providers for payment processing. For example, to receive TikTok Tips, creators are required to set up a Stripe account. And creators can withdraw the money through the in-app currency, TikTok Coins, via PayPal. However, given its work with JP Morgan, the company may soon enter the payments processing space.
TikTok in the US
Recently, TikTok has also launched its e-commerce shop in the US. This new store stocks and ships products made by creators to the app’s US consumers. The shop is expected to only pay creators once buyers have been found and return unpopular items back to their makers, in an effort to keep inventory costs low.
But so far, TikTok’s move into retail is not panning out well for the company, which is expected to lose over $500 million through its shopping service in the US. Before its retail push, TikTok utilized Shopify as a digital forefront for direct-to-consumer sales of merchandise by its creators. In a bid to save its retail push in the US, TikTok is moving creators and their merchandise to the TikTok Shop, by closing down its Shopify-integrated storefronts. It also plans to ban any links to other ecommerce websites on the platform.
Meanwhile, government scrutiny around TikTok’s Chinese links are expected to impact its business in America. To avoid a ban in America, the platform is currently discussing a plan with the Biden administration that would give the government “unprecedented” control over its platform.
If US regulators decide to limit TikTok’s presence in the US, it is unclear how ByteDance's partnership with JPMC will be affected. “It is concerning enough for JPMorgan Chase to carry water for Beijing and falsely characterize ByteDance’s ‘mission [as] to inspire creativity and enrich life,’ said Senator Marco Rubio, while referencing a case study on the bank’s website.