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Nice post, albeit a bit scary! 

I have one question about funding sources supported by Alipay / WeChat Pay. I'm sure they include Chinese bank accounts. But what about Chinese and foreign credit / debit cards - are they also supported?

Bank merely facilitates the payment. There are many other actors in the transaction: Customer, ISP, Fraudulent Supplier, Platform that connects Customer and Fraudulent Supplier (e.g. Craigslist). Just as Craiglist or the ISP won't accept the risk of fraud in the transaction despite their role in putting through the transaction, I don't see why Bank should. The Customer's Decision to buy from Fraudulent Supplier is the most culpable party for the fraud. If the entire cost of fraud can't be slapped on that party for political or whatever reason, the only other fair option I see is to hold all parties collectively culpable and slap the cost of fraud on all of them. If there's a practical method of recovering the cost from all of them, well and good. Otherwise, I'm afraid, a payments tax might the only way out.

Re. Anon's comment, A2A payments already attract a charge in India, and, yes, many customers have gone back to cash and cheque. In response, some banks have already started levying charges for usage of cash and cheques beyond a certain free number per month and other banks are seriously considering such a move.

@Melvin Haskins:

At least two UK banks and three Indian banks I bank with warn customers that, if they use FPS or NEFT or IMPS or any A2A payment method, (a) they must ensure that they're directing the payment to the intended beneficiary's account number (b) Bank is not responsible for any misdirected payment. At other places, I've argued that Banks are stunting the adoption of A2A payment methods by using such scary language. But if the intrepid Payor still goes ahead and uses them, shouldn't they know that, by default, they're taking the risk of fraudulent payments? Especially since, AFAIK, Banks have never accepted the risk of fraudulent payments for any mode of payment. (Credit card is the sole exception, but, even there, I don't know a single Bank that advertises this fact.)

@Victor Van Rij: 

At the point of making the payment, Payor knows or does not know that Payee is Fraudster. If former, Payor would / should not go ahead with the payment. If latter, I imagine the realization that Payee is Fraudster comes after the payment is made and goods / services are found defective or whatever i.e. ex post facto. In this case, how would the Payor's Bank slow down or freeze the payment while it is being made? Let's also not forget that Banks are governed by strict SLAs on payment roundtrip duration and, unlike PayPal et al, can't get away by freezing a payment / account for suspected fraud. As for the rest of your comment, your use of the passive voice obfuscates the reality that (a) Nobody forced the Payor to use Faster Payments (b) Payor transferred the money to whoever out of their own free will and volition. Therefore, Payor must take responsibility for their actions. 

BTW, it's "Ketharaman":)

This suggests some kind of credit card like chargeback mechanism to be put in place for A2A payments. But chargeback works in credit card because the Beneficiary is a Merchant, who not only has an ongoing relationship with the Acquirer Bank but is also pre-vetted by Acquirer Bank for issue of Merchant Account. In the A2A context, all that the Bene's bank does is KYC. KYC is neither a character certificate nor a background check, so a guy who proves to be a fraudster after-the-fact will pass KYC as easily as a genuine Beneficiary. OTOH, Merchant Account issuance process involves a certain degree of vetting the Beneficiary's business and nobody can question the Acquirer Bank if it denies Merchant Account to someone. There's no way the Bene bank can retrieve money from Fraudster, who can always claim he delivered whatever he committed to the Customer - it becomes a "he said, she said" kind of situation. Again, while many Merchants do consider credit card chargeback unfair, they live with it because that's the cost of popularizing credit card among Payers. Not sure whether the same will be possible in A2A.

Try as I might, I couldn't find the answer to the question in the title of this blog post anywhere within the body of the post. So, let me take a shot.

As I highlighted in When Will Fintechs Sell What Consumers Want To Buy?, credit is one of the few desperately underserved finserv products. Most fintech lenders are funded by VCs and must show heavy traction in order to whip up frothy valuations. They can meet this goal quite easily with an almost-exclusive focus on credit products. As for the quality of loans and recovery rates, that's a can that fintechs can afford to kick down the road until the money taps keep flowing.

@MylesDawson: TY for your reply. BTW, I have not downloaded your report and, because your reply suffices, I won't either. Must be some impersonator:)

While it's no consolation, outages are striking both traditional banks with legacy systems and newer FIs like Tesco Bank & Cashplus at regular frequency.

https://www.finextra.com/newsarticle/32686/outage-fever-strikes-uk-banks

I sympathize with the victims for their loss and hope they get suitable redressal. But, at the same time, incidents like this do underscore the greater protection offered by credit cards. Had these payments been made with credit card, customers would have a good chance of being made good for the entire £500M. 

Mostly agree for B2B technology. Agree partially for B2C technologies such as AirBnB, Netflix, et al. But it's hard to appreciate what business problems were solved by blockbuster B2C technologies like Amazon, Facebook, Twitter, Uber et al. Although, in all cases, technology must always be packaged - though not necessarily created - to solve a pain or provide a gain.