Why the U.S. Lacks Credit Products Like Huabei and Jiebei

Original | Odaily Planet Daily (@OdailyChina)

Author | Wenser (@wenser 2010 )

Recently, Musk once again released news about X Money, maintaining his longstanding enthusiasm for “recreating WeChat,” while also highlighting the reality that the United States currently lacks a one-stop payment platform akin to WeChat Pay or Alipay. This raises a follow-up question: why has the United States across the ocean not developed large-scale small-loan products such as Huabei or Jiebei?

After careful investigation, the truth is somewhat surprising. On this financial hotbed in the United States, a series of层层围堵 cages have blocked small loans—meant to benefit millions of households—while allowing a high-cost, widespread credit card ecosystem to persistently drain resources.

In fact, the United States, with its developed financial industry, still has demand for microcredit.

According to the 2023 FDIC survey, approximately 5.6 million U.S. households (about 4.2% of the population) are unbanked, and about 19 million households (about 14.2% of the population) are underbanked. According to the Federal Reserve’s 2024 Report on the Economic Well-Being of U.S. Households, 22% of adults with annual incomes below $25,000 lack a bank account, and 6% of adults (approximately 15 million people) are unbanked.

The primary reason these people do not open bank accounts is simple: "not having enough money to meet minimum balance requirements"; second is "lack of trust in the banking system," where for many, banks are demonized as vampires that only pressure and force you to pay loans; about two-thirds of unbanked households rely entirely on cash for daily expenses.

For these individuals living at the bottom of the financial ladder, payday loans have become one of the few lifelines available. Despite annual interest rates that can reach as high as 400%, these loans peaked in 2014 with 12 million active users, annual lending volumes of approximately $46 billion, and over 1,000 service providers offering this type of credit. In other words, these people can only access extremely expensive borrowing. To major U.S. banks, they are “junk customers” with extremely low FICO scores who cannot even qualify for a credit card—the very bottom of the financial pyramid.

On this basis, the group using the "buy now, pay later" loan service is slightly better.

According to research, the global number of "buy now, pay later" loan users was approximately 380 million in 2024 and is projected to increase to about 670 million by 2028; in 2025, the number of "buy now, pay later" loan users in the United States was 91.5 million, expected to reach 96.3 million by 2026; in 2025, the GMV of the U.S. "buy now, pay later" loan market was approximately $122.2 billion, with a CAGR of 20.3% from 2021 to 2024.

For young people and the main consumer group with strong consumption desires and rapidly growing purchasing power, the slightly retro and cumbersome credit card spending process is less convenient than the flexible, easy-to-use, interest-free installment option of "buy now, pay later," which is therefore slowly gaining adoption. However, compared to the scale of tens of millions of merchants worldwide and an even larger consumer base, this group is undoubtedly niche. Of course, traditional financial institutions such as American Express and Citibank have already introduced similar "buy now, pay later" installment features for credit cardholders, and are rapidly catching up.

In contrast, the credit card system has thrived in the United States, reaping substantial benefits through its first-mover advantage, network effects, cross-subsidization, and compliance cost advantages.

On the levels of first-mover advantage and network effects, according to Federal Reserve statistics, 70%-80% of U.S. adults hold credit cards; by the end of 2025, outstanding credit card balances reached $1.28 trillion (New York Fed data, February 2026); 175 million cardholders possess approximately 648 million cards, with an average annual percentage rate of 22.3% (Q4 2025 data); additionally, the average APR on newly issued credit cards is 23.75%; further, the CFPB’s 2025 report indicates that consumers paid a staggering $160 billion in credit card interest in 2024 alone—a 52% increase from $105 billion in 2022. Without exaggeration, credit cards are America’s largest form of legal predatory lending.

On the level of cross-subsidization and compliance costs, statistics show that approximately 45%-50% of credit cardholders choose to pay off their full balance each month; for them, credit cards serve as a free short-term credit tool (equivalent to a 25-day interest-free period), and some even earn money through reward points and cashback. Among credit cardholders with an annual income below $50,000, 56% carry a balance each month, while this figure drops to 36% among those with an annual income exceeding $100,000. In contrast, over 27 million Americans can only afford to make the minimum payment each month, effectively paying interest rather than principal. As a result, the U.S. credit card system has developed a peculiar equilibrium in which users unable to pay their full balance subsidize those who do—through significantly higher annual interest rates.

On both the supply and demand sides, the current harsh reality of the U.S. financial industry is evident: some people cannot get credit cards; some credit card holders are effectively funding banks and others; and some prefer personal loans over using credit cards. The underlying causes of this situation are undoubtedly complex and deep-rooted.

Delving into the specific reasons why the United States does not have an internet finance industry as vibrant as that in China, it is essentially a system of four systemic and structural walls.

First, it is the stringent and fragmented regulatory system of the U.S. financial industry.

On one hand, the dual regulatory framework of the federal government and 50 states creates extremely high barriers to financial compliance. Fragmented regulation causes compliance costs for companies seeking to engage in lending to grow nonlinearly, resulting in an extremely low return on investment. On the other hand, the 2008 financial crisis provided strong support for tighter financial regulation; after the passage of the Dodd-Frank Act in 2010, the Consumer Financial Protection Bureau (CFPB) expanded its authority, further increasing compliance costs and objectively eliminating the possibility for non-bank institutions to scale in the small-loan sector. To some extent, the U.S. regulatory system protects not consumers, but banks reaping the benefits.

Second, it is the legal boundary for U.S. privacy data.

Theoretically, U.S. internet tech giants possess more comprehensive user privacy and personal data than domestic internet companies: Amazon knows what you bought, Google knows what you searched for, Apple knows what you used—but the FCRA (Fair Credit Reporting Act, enacted in 1970 and repeatedly amended) strictly regulates which data can and cannot be used for credit decisions; the CFPB further expanded the scope of FCRA between 2023 and 2024 to bring more data brokerage activities under regulation; and California’s CCPA, followed by the CPRA, added another layer of state-level privacy protection. Together, these regulations mean that even though U.S. tech companies have vast amounts of user behavioral data, they are legally prohibited from directly feeding this data into credit risk models. This is not a technical barrier—it’s a legal红线.

Third, there is the valuation penalty imposed by capital markets on internet companies.

In the eyes of Wall Street capital, where money never sleeps, internet technology companies see their appeal—measured by revenue, profitability, and other business metrics—diminish once they become tied to financial services. Historically, tech companies have enjoyed high price-to-earnings ratios due to their light asset models, high growth potential, and network effects, while financial firms have been valued lower due to their capital-intensive nature, strict regulation, and cyclical performance. Previously, Apple partnered with Goldman Sachs in 2019 to launch the Apple Card credit card service, which ultimately ended after Goldman Sachs incurred losses exceeding $6 billion, faced a delinquency rate of 2.93%, and transferred the business to JPMorgan. While the failure was partly due to Goldman Sachs’ shortcomings in retail lending and risk management, the more critical reason was Apple’s reluctance to become deeply involved or assume credit risk.

Fourth, credit pricing power is held by financial giants.

The key players in U.S. consumer credit are major banks and financial conglomerates such as 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 U.S. consumer debt amounts to approximately $17.86 trillion (Equifax data, June 2025), with $13.21 trillion in mortgage debt and $4.65 trillion in non-mortgage debt (including auto loans at 36%, student loans at 28.5%, and credit cards at 24.2%). This vast credit empire is backed by financial giants with wealth rivaling nations. Under a system shaped by banking lobbying groups and entrenched consumer behavior patterns, the 22% interest rate on credit cards becomes an unavoidable burden.

In summary, the current reality of the U.S. financial industry is that credit cards have already secured their position, regulations have blocked the path, privacy laws have cut off data support, Wall Street dislikes valuation methods for financial services, and major banks refuse to allow challengers to infringe upon their authority and interests—all of these factors combined have kept internet-based microcredit, which should benefit millions of individuals and small businesses, out of the U.S. market.