Original | Odaily Planet Daily (@OdailyChina)

Author | Wenser (@wenser 2010 )

Recently, Musk once again released news about X Money, maintaining his usual enthusiasm for "recreating a WeChat"; on the other hand, he also highlighted the reality that the United States currently lacks a one-stop payment platform like WeChat Pay or Alipay. A resulting question is, why has the US not developed a massive micro-loan product similar to Huabei or Jiebei?

Upon careful study, the truth of the matter is somewhat unexpected. In the financial hotbed of the United States, a tightly enclosed cage has blocked micro-loans that should benefit thousands of households, instead allowing an entire ecosystem of "high cost, broad coverage" credit cards to continue to profit.

The Cruel Story of the American Financial Underclass: No One Cares Whether You Have Money to Spend

In fact, the financially developed United States does not lack the demand for micro-credit.

According to data from the FDIC's 2023 survey, there are about 5.6 million "unbanked" households in the US (approximately 4.2% of the population) and about 19 million "underbanked" households (approximately 14.2% of the population); according to the Federal Reserve's 2024 Economic Well-Being report, 22% of adults with an annual income below $25,000 do not have a bank account; 6% of adults (approximately 15 million people) are in an "unbanked" state.

The primary reason these people do not open bank accounts is simple: "not enough money to meet minimum balance requirements"; secondly, they have "distrust in the banking system." For many, banks are demonized vampires that only pressure you, forcing you to repay loans; about two-thirds of unbanked households rely entirely on cash transactions in their daily lives.

For these individuals living at the financial bottom, payday loans have become one of the few life-saving options. Although the annualized interest rate of the latter can reach up to 400%, it still maintained around 12 million active users at its peak in 2014, with annual lending of about $46 billion, provided by more than 1,000 service providers. In other words, these people can only borrow extremely expensive money. For major banks in the US, they are "subprime users" with very low FICO scores, unable even to obtain credit cards—truly the lowest tier.

Based on this, the "buy now, pay later" loan services appeal slightly more to some users.

According to surveys, in 2024, there will be approximately 380 million global "buy now, pay later" loan users, expected to increase to about 670 million by 2028; in 2025, the number of "buy now, pay later" loan users in the US will be 91.5 million; it is expected to reach 96.3 million by 2026; in 2025, the GMV of the US "buy now, pay later" loan market is about $122.2 billion, with a CAGR of 20.3% from 2021 to 2024.

For the young and the main consumer force who have strong buying desire and rapidly growing purchasing power, the somewhat outdated and lengthy credit card consumption process is less useful than the flexible, convenient, and interest-free installment options of "buy now, pay later," thus remaining in a phase of slow penetration. However, compared to the tens of millions of global merchants and an even larger consumer base, this group is undoubtedly just a niche. Of course, American Express, Citibank, and others have already launched similar "buy now, pay later" installment features for credit card holders, and traditional financial institutions are quickly catching up.

In contrast, the credit card system has thrived in the US by taking advantage of first-mover advantages, network effects, cross-subsidization, and compliance costs, reaping significant benefits.

In terms of first-mover advantages and network effects, according to data from the Federal Reserve, 70%-80% of American adults hold credit cards; by the end of 2025, outstanding credit card balances will reach $1.28 trillion (as of February 2026 data from the New York Fed); 175 million cardholders hold about 648 million cards, with an average annual interest rate of 22.3% (Q4 2025 data); in addition, the average APR for newly issued credit cards is 23.75%; another CFPB report for 2025 points out that in just one year, consumers paid as much as $160 billion in credit card interest, a staggering 52% increase compared to $105 billion in 2022. It is not an exaggeration to say that credit cards are the largest form of legal predatory lending in the US.

In terms of cross-subsidization and compliance costs, statistics show that about 45%-50% of credit card holders choose to pay off their balance in full each month, treating credit cards as free short-term credit tools (equivalent to a 25-day interest-free period), and even earning cashback through points; whereas among credit card holders with annual incomes below $50,000, 56% carry a balance every month; this number drops to 36% among credit card holders with incomes over $100,000. In contrast, over 27 million Americans can only pay the minimum amount each month, effectively paying interest rather than principal. Thus, the American credit card system has created a bizarre balance where users who cannot pay their balances in full are subsidizing the full-payment user group through high annual rate costs.

On both the supply and demand sides, the current cruel reality of the American financial industry presents itself: some people cannot open credit cards; some credit card holders are bleeding towards banks and others; some would rather choose consumer loans than use credit cards. The causes of this situation are undoubtedly complex and deep-seated.

The Forgotten American Internet Financial Industry: Regulation, Privacy, Capital, and Tech Giants' Control

A closer look at why the US lacks the prosperous internet financial industry seen domestically reveals a fundamentally systemic and structural four-sided high wall.

The first is the stringent and fragmented regulatory system of the American financial industry.

On one hand, the federal + 50 state dual-track regulatory framework creates incredibly high compliance barriers for financial companies. The issue of regulatory fragmentation often leads to non-linear increases in compliance costs for companies wanting to engage in loan business, with a very low return on investment; on the other hand, the outbreak of the 2008 financial crisis provided favorable support for tightening financial regulation. After the passage of the "Dodd-Frank Act" in 2010, the Consumer Financial Protection Bureau (CFPB) further expanded its power boundaries, increasing compliance costs and objectively eliminating the potential for non-bank entities to thrive in the field of micro-credit. To some extent, the American regulatory system protects not consumers, but the banks reaping the benefits.

The second is the legal red lines surrounding privacy data in the US.

Theoretically speaking, American internet tech giants possess more comprehensive user privacy data and personal information than domestic internet companies: Amazon knows what you bought, Google knows what you searched, Apple knows what you used—yet the FCRA (Fair Credit Reporting Act, enacted in 1970 and revised several times) strictly regulates what data can be used for credit decisions and what cannot; the CFPB is further pushing to expand the applicability of the FCRA in 2023-2024, bringing more data brokerage behaviors under regulation; California's CCPA and the subsequent CPRA added another layer of state-level privacy protection. Such regulations mean that even if American tech companies have rich user behavior data, they cannot legally feed this data directly into credit risk control models. This is not a technical barrier, but a legal red line.

The third is the capital market valuation punishment faced by internet companies.

In the eyes of the ever-restless capital on Wall Street, once an internet tech company engages in financial business, its revenue, profitability, and overall business attractiveness significantly diminish—traditionally, internet tech companies have enjoyed the bounty of high price-to-earnings ratios (light assets, high growth, network effects), while financial companies have low market valuations due to heavy assets, strong regulation, and cyclicality. Previously, Apple had partnered with Goldman Sachs to launch the Apple Card credit card business in 2019, but eventually faced over $6 billion in losses with a bad debt rate of 2.93%, leading to its transfer to JPMorgan. While the shortcomings of investment banks like Goldman Sachs in retail lending and risk control management contributed to this business's cessation, Apple’s reluctance to get too deeply involved or assume credit risks is the more crucial reason.

The fourth is that the power to set credit pricing lies in the hands of financial giants.

The core players in American consumer credit are large banks and financial groups like JPMorgan Chase, Bank of America, Citigroup, Capital One, and Wells Fargo. They control nearly all consumer credit product lines, including credit card issuance, personal loans, mortgages, and auto loans. According to statistics, total consumer debt in the US is approximately $17.86 trillion (Equifax data as of June 2025), including $13.21 trillion in mortgages and $4.65 trillion in non-mortgage loans (with 36% in auto loans, 28.5% in student loans, and 24.2% in credit cards). This vast credit empire is backed by intensely wealthy financial hands. In a system designed and manipulated by banking lobby groups, combined with the inertia of consumer behavior, the credit card's 22% interest rate becomes a bitter fruit to swallow.

In summary, the current reality of the American financial industry is that credit cards have taken the initial position, regulations have blocked the path, privacy laws have severed data support, Wall Street dislikes financial business valuation methods, and banking giants do not allow challengers to infringe upon their authority and interests. All these factors come together to keep internet micro-credit, which should benefit numerous individuals and small enterprises, outside the US market.

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