Mobile Applications

Clock Ticks On TikTok, WeChat Bans – And eCommerce May Suffer

Amid TikTok, WeChat Bans, eCommerce May Suffer

Sunday looms as a red-letter day for TikTok and Tencent’s WeChat – and tens of millions of users who use the apps to conduct commerce.

Here in the States, the government is restricting access to the two apps in a battle between China and the U.S. that centers on national security.

The Commerce Department said on Friday (Sept. 18) that providers will be banned from distributing those apps, which of course impacts Google and Apple, the tech giants whose app stores are key access areas.

"The only real change as of Sunday night will be [TikTok users] won't have access to improved apps, updated apps, upgraded apps or maintenance," Commerce Secretary Wilbur Ross said on Friday morning, as reported by The New York Times.

Drilling down into what a ban actually means, in terms of using the apps themselves, the Commerce Department order states in stark terms that “any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd …shall be prohibited to the extent permitted under applicable law.”

The ban cites the May 15, 2019 executive order signed by President Donald Trump (known as Executive Order 13873) contending that foreign adversaries are “increasingly creating and exploiting vulnerabilities in information and communications technology and services (ICTS)” to obtain sensitive information.

The Friday announcement is the latest chapter in an ongoing saga between ByteDance and companies such as Microsoft and Oracle, which are in talks to create a U.S.-based firm that would, ostensibly, allay those data security concerns.

Beyond the geopolitical saber-rattling, here’s what it all means: The Trump administration’s ban would restrict Apple and Google from letting users in the U.S. utilize those apps, while still letting users outside the U.S. use them.

That demarcation, we contend, divides the world into users who can transact and those who cannot, and has ripple effects for eCommerce. As of Sept. 20 for TikTok and Nov. 12 for WeChat, the Commerce Department is banning updates to the codes, the transmission of data and, as the order notes, “any provision of internet hosting” or “content delivery network services enabling the functioning or optimization of the mobile application” in the US.  The order seems a way to basically render the apps nonexistent in the U.S.

Interestingly, the order specifically states that the prohibition does not apply to TikTok’s “payment of wages, salaries and benefit packages to employees or contractors.”

A separate release by the Commerce Department noted that as of Sunday, prohibited transactions include “any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S.”

As widely reported, TikTok’s user base in the U.S. is around 100 million; WeChat’s installed base here is 19 million, as Reuters reported.

In terms of commerce, the impact on the apps’ parent companies may be slight. As reported in The Wall Street Journal, Tencent garners less than 2 percent of its sales from the U.S. But the bans would quickly hobble commerce conducted by Chinese nationals living, working and studying here – and, of course, making payments here. And TikTok has caught on like wildfire in the States, especially among younger users.

And as PYMNTS reported last month, as bans first loomed: There is the specter of an economic war of sorts conducted across borders (here, between China and the U.S.) that could ensnare Big Tech. Apple gets a mid-teens percentage revenue contribution from the country; the card giants have been trying to gain a foothold in China. If the U.S. bans hosting and transmission, as well as mobile conduits, the quarrel will quickly escalate, ensnaring merchants, payments processors and, of course, consumers.

It was unclear last month what scope of transactions the Trump administration would look to curtail – and now the scope has crystallized. The ban’s extent is broad indeed – and what’s left undefined, at least for now, is just how widespread the impact may be to eCommerce as a result of trade tensions.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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