TikTok’s parent ByteDance is pushing payments with help from JP Morgan
One of America’s most powerful banks is quietly building financial tools for ByteDance products like TikTok, expanding China’s grip on the high-stakes payments space.
J.P. Morgan has been quietly working with TikTok parent ByteDance on payment technology that is helping the Chinese giant expand into more than two dozen markets and reach millions of users. The partnership is just one part of ByteDance’s broader push into the fintech space.
TikTok is a sprawling marketplace: A huge amount of money moves across the platform every day as people buy coins to send virtual gifts (like diamonds and roses) to their favorite creators and others they meet through the app, who can then convert those items into money. Users worldwide spent $3.4 billion on TikTok in 2022, up from $2 billion the year before, and spending in the U.S. alone more than tripled — to $670 million — from the year before, according to data analytics firm Sensor Tower.
ByteDance enlisted JP Morgan to streamline those transactions, improve the way payments are sent and received, and set up a centralized bank account for ByteDance’s more than a dozen products, including TikTok and its Chinese counterpart Douyin. Notably, ByteDance has also brought in several JP Morgan executives for the global payments team to lead its larger fintech expansion.
Neither company would comment on the partnership itself or when it started. But according to a case study on JP Morgan’s website detailing their work together, the bank has built “a real-time payments infrastructure” for ByteDance that now allows users to “be paid instantly and directly into their bank accounts at any time or time,” an improvement on a previous, much slower e-wallet system This JP Morgan technology, enabled in the US and Europe, “now covers about a fifth of TikTok’s 1 billion active users worldwide.” The payment system “also allows real-time exchange of data between ByteDance and JP Morgan”, so that ByteDance can “view and monitor payments,” the memo said. Neither company would say who has access to the sensitive data or what type of monitoring is taking place.
Major American banks have long worked with Chinese companies. But intelligence and business experts say ByteDance’s move to payments stands out because of the current geopolitical climate and widespread fears about TikTok’s handling of Americans’ data, given its ties to China. Both Treasury Secretary Janet Yellen and FBI Director Christopher Wray at the end of last year spoke publicly about the national security concerns surrounding TikTok.
Former National Security Agency general counsel Glenn Gerstell said JP Morgan with ByteDance’s “financial plumbing” is not problematic. But he said helping ByteDance plant a flag in payments — an area where China is already building a stronghold with Alibaba’s Alipay and Tencent’s Tenpay, used with WeChat — is a slippery, potentially dangerous slope.
“The bigger picture of the potential threat from Chinese payment mechanisms … certainly represents a genuine security concern for the United States,” Gerstell said Forbes. And although JP Morgan’s work with TikTok’s owner is “not a black and white [issue],” he said, “there are steps along a gray continuum.”
“This is a step in helping a major Chinese company, ByteDance, facilitate payments on a platform that poses a national security risk,” he added. “Is this one activity in itself terrible? No, probably not. But again, it’s just another step. … I don’t think Americans really appreciate the magnitude of it and the potential risks.”
JP Morgan’s work with ByteDance is “not a black and white [issue]. There are steps along a gray continuum.”
JP Morgan did not respond to a request for comment. ByteDance spokesperson Jennifer Banks said only that the global payments team “is an internal function that supports the needs of our businesses” and that “this department works to ensure that third parties, including partners and suppliers, are compensated for their work.” In response to a detailed list of questions, TikTok led Forbes to a blog post about how it protects Americans’ data.
Scrutiny of TikTok is at an all-time high as the Biden administration seeks a deal that addresses these homeland security issues and as bipartisan attorneys general investigate the app’s alleged harm to minors. TikTok is also being sued by Indiana for allegedly deceiving users about data security and child safety on the app, and late last Congress lawmakers introduced bipartisan legislation to ban it.
The widespread alarm has done little to deter TikTok’s virality. The app has more than a billion users worldwide, and in the US it was downloaded nearly 60 million times last year, according to Sensor Tower. The workforce is also growing: As Meta, one of TikTok’s fiercest rivals, sheds staff to deal with the economic downturn, TikTok is hiring thousands — including in the U.S.
Do you have a tip about these companies? Contact author Alexandra S. Levine at Signal at (310) 526–1242 or email [email protected].
One of TikTok’s hiring priorities appears to be staffing the Global Payments team, which is “building a platform to provide cross-border payment solutions for all of ByteDance’s products and services, such as TikTok,” according to a recent job posting on LinkedIn. Heading that team is longtime JP Morgan executive Kingsley Lam, who after more than a decade at the bank left in 2020 to oversee global payments, for the Americas and Europe, at TikTok and ByteDance, according to LinkedIn (he did not respond to an interview request). . Several other former JP Morgan employees have decamped for ByteDance’s global payments team, including executives in the UK, Shanghai and Beijing, according to LinkedIn. Neither company would comment on the hiring strategy.
Xiaomeng Lu, a director at Eurasia Group, a firm that advises clients on geopolitical risks, sees the departures as evidence that the unicorn is “rich in cash” and can afford to recruit experienced financial experts and pay them a premium. And despite the increased political pressure in the United States, she said the team provides clear benefits for both sides.
For JP Morgan, which only recently gained expanded market access in China, the ByteDance collaboration could give them a foothold in China’s e-payments market, according to Lu. “Alipay is no longer politically popular among the party leadership,” she said, “and I think they see it as a market opportunity.”
For ByteDance, meanwhile, it’s smart positioning and an invaluable endorsement to sync with a revered American financial institution and experienced player in American politics.
“JP Morgan is such a well-established, well-networked, very influential stakeholder in the US, and working with a major player in the US makes the company look more trustworthy,” Lu said. “They must have considered that: They want a very credible partner in this space who will help them burnish their own reputation. … They’re trying so hard to find every channel to get their message across in Washington, and JP Morgan is so good on that.”
“How much that registers with the policy community in DC I think is somewhat questionable,” she added, “but at least in business it does [ByteDance] look good.”
“Cooperation with a major player in the USA makes the company look more reliable. They must have considered it.”
JP Morgan’s services have helped ByteDance “expand to over 30 markets,” “cover millions of users” and grow its business “10-fold,” the note said. JP Morgan’s managing director of payments, Sridhar Kanthadai, discussed the project in the note, along with an unnamed ByteDance payments executive.
Gerstell, the former legal chief of the NSA, said that while it may be beneficial for the United States or an American company to have some insight into Chinese payment mechanisms and how they work, “the threat that information from American users or Western users will be made available to Chinese authorities for surveillance purposes” is also “a very big concern.” Beyond the data issue, having a significant financial platform (possibly with another currency system, such as the digital yuan) that is not readily accessible to US intelligence agencies could be “a potentially huge problem.”
Some of these issues may be addressed in the upcoming national security agreement led by CFIUS. Despite growing concerns, a blanket U.S. ban on the app is unlikely, Eurasia Group’s Lu said, citing its popularity as a search engine and the large volume of U.S. businesses operating on the platform. A more likely outcome of the deal is increased restrictions or a spin-off to reduce the risk of Chinese ownership, she said. Lu believes the deal will encourage more American companies to work with ByteDance – rather than scare them away.
“If CFIUS sets another set of benchmarks and ByteDance can meet them, that’s a green light, that’s a big brain signal for the banks,” she said. “There could be more US companies coming to ByteDance and asking for deals like this. … And from JP Morgan’s perspective, it could be a safer deal in the long run.”
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