From Alipay to Tenpay, third-party e-payment platforms within China have continued to grow. The value of third-party e-payments in China reached 99 trillion yuan in 2016, representing an annual growth rate of 100% since 2015, data from Moody’s has revealed.

China leading the way in third-party e-payments. Around US$1.8 trillion payments were made through third-party mobile platforms in China, compared to only US$100 million in the US, data from iResearch and Forrester Research shows.

In contrast, the traditional Chinese banking system has struggled to keep up with third-party e-payment platforms, opting instead to finance and support state-owned enterprises rather than retail customers. Data from the People’s Bank of China show that 6.1 billion bankcards were issued in the country during 2016, but only 8% of them were credit cards. This is equivalent to 0.31 credit cards per capita, well below the average of 3 credit cards per person in developed markets.

Electronic payments overall in China, including traditional banking channels such as ATMs, increased to 2,494 trillion yuan in 2016 compared to 1,075 trillion yuan in 2013.

“The surge of Chinese third-party electronic payments providers is positive for internet companies and most service and consumer related companies, although it could also be negative for some companies in traditional retail channels,” says Lillian Li, vice president and senior analyst at Moody’s.

“While it will not have a near-term significant impact on the profitability of Chinese banks, it will increase competition and drive the banks to transform their business models in the payment business.”

While Chinese banks are clearly losing out in the retail payments space, the biggest threat from third-party platforms is their recent willingness to enter the lending business. Ant Financial, under the Alibaba brand, has started to offer credit to SME users in their platform.