TikTok owner partners with J.P. Morgan to power its payments system

Banking powerhouse J.P. Morgan is working with Chinese technology company ByteDance to drive TikTok's expansion with improved automation of financial services on the platform.

According to the financial company's website, TikTok's Chinese parent company is trying to increase the user base by facilitating the financial rewards generated within the app.

However, to do so, they needed to improve the ways in which payments are sent and received, and that is precisely where J.P. Morgan comes in.

"ByteDance enlisted J.P. Morgan to develop a comprehensive payment solution, with the comfort and convenience of its users front and center" the bank explained.

Improvements

According to the financial institution, one of the main objectives was to build a real-time payment infrastructure so that users can receive money instantly and directly to their bank accounts.

"This functionality can replace payments routed through e-wallets, which require users to manually move the payments into their respective bank accounts," the bank said on its website.

The companies also focused on creating a system to monitor payments in real time and to allow users to check financial transactions on TikTok and other ByteDance applications.

"We have reduced our transactions costs ten-fold thanks to the real-time payment facilities, and users are now paid instantaneously, versus two business days in the past. With [Virtual Account Management], we have also migrated our 500 physical accounts into a virtual structure, eliminating the costs of maintaining the accounts, enhancing visibility and streamlining reporting," ByteDance executives said, according to the financial company's website.

Security concerns

Glenn Gerstell, former general counsel of the National Security Agency, stated that assisting China in its payment mechanisms could come to represent a "potential threat" to U.S. national security.

"This is a step in assisting a major Chinese company, ByteDance, facilitate payments on a platform that does present national security risks. Is this one activity itself terrible? No, probably not. But again, it's just another step. ... I don't think Americans really appreciate the extent of it and the potential risks," he said.

How much money is moved on TikTok?

According to Forbes, the Chinese video platform moves a large amount of money on a daily basis, largely because users choose to buy virtual gifts for content creators, who can then exchange these items for money.

The media report indicates that in 2022, users worldwide spent $3.4 billion. Of this, $670 million was spent in the United States, which was three times more than in the previous year.