Cash is already pretty much dead in China as the country lives the future with mobile pay
Cash is already pretty much dead in China as the country
lives the future with mobile pay
Mainland Chinese stores and services are increasingly
centered around mobile pay apps like WeChat Pay and Alipay.
Chinese mobile payment volume more than doubled to $5
trillion in 2016, according to Analysys data cited by Hillhouse Capital.
Mobile pay is growing so rapidly in mainland China that
as a foreigner, I sometimes found it difficult to complete basic transactions
without it.
The dominance of mobile transactions lends itself to
greater data collection by the Chinese government.
By Evelyn Cheng October 9, 2017 CNBC.com
The transformation of a society limited to bills
denominated in 100 yuan ($15) or less into one where QR payment codes abound
was by far the biggest change in mainland China since my last visit four years
ago.
When eating out or shopping with local friends, they paid
by scanning a QR code on the restaurant table or by showing a similar code on
their smartphones to the store clerk. A spices shop, museum souvenir store and
seller of traditional Chinese calligraphy brushes all had signs saying they
accepted mobile pay.
Rather than, "Do you take credit cards?" the
question was often "Do you take Alipay? WeChat Pay?" The running joke
was that street beggars would rather take a mobile donation than cash.
Lack of red tape and a less developed financial system
have apparently allowed mainland China to leapfrog the developed world into
embracing mobile payments.
Mobile payment volume in the country more than doubled to
$5 trillion in 2016, according to Analysys data cited by Hillhouse Capital in a
May report. In the first quarter of this year, Alipay had 54 percent of that
mobile payments market, and WeChat Pay accounted for 40 percent, the study
said.
The Chinese mobile pay habit is also affecting other
countries. More than 6 million Chinese traveled abroad during the "Golden
Week" national holiday in early October, according to state-backed media
outlet Xinhua. That puts pressure on popular tourist destinations like Japan
and Hong Kong to add mobile pay services.
Just over the border in Hong Kong, I heard a few mainland
Chinese customers asking a store clerk to scan their phones' QR codes while
Cantonese-speaking locals paid in cash. In April, Nikkei reported that the
number of stores accepting Alipay in Japan will double to 45,000 this year,
according to the regional head of Ant Financial Services.
The growth of mobile pay in China comes off a solid base
of smartphone users. The ubiquitous WeChat messaging app from Chinese
technology giant Tencent reached 963 million monthly active users in the second
quarter. In professional settings, adding each other on WeChat sometimes
replaced business card exchanges.
Alipay, which is owned by Alibaba affiliate Ant Financial
Services, has 520 million users, according to its international website.
The app is linked to online money market fund Yu'e bao,
encouraging users to invest and spend with Alipay. Attractive interest rates of
nearly 4 percent or more have turned it into the largest money market fund in
the world, with 1.43 trillion yuan ($217 billion) as of the end of June,
according to state media reports citing Yu'e bao's manager, Tianhong Asset
Management.
Hong Kong-based research investment company CLSA expects
Chinese electronic payments volume to quadruple to 300 trillion yuan by 2021.
During that time, online wealth management products' assets under management
should triple to 6.7 trillion yuan and online loans could also triple to 3.5
trillion, said Elinor Leung, head of Asia Telecom and Internet Research at
CLSA.
"High mobile internet and ecommerce penetration, and
an underdeveloped traditional financial market will drive growth," Leung
said in a Sept. 5 report.
Mobile pay is growing so rapidly in mainland China that
as a foreigner I sometimes found it difficult to complete basic transactions
without it.
When I tried to pay at a Beijing McDonald's on a late
night, the only payment options were China's Union Pay credit card system,
Apple Pay or WeChat Pay and Alipay. As an American visitor without a Chinese
bank account, I wasn't able to find a way to use those systems and the store
clerk wouldn't take my cash.
"Cash is accepted in all McDonald's restaurants
across China. After our investigation, we believe this is an isolated case that
happened during night shift change, and thus, all cash counters were
temporarily closed," a McDonald's China Customer Care Center told me in an
email.
Taxis were also nearly impossible to hail in Beijing due
to the rise of Didi, a ride-hailing app that bought Uber's China operations in
a deal worth $35 billion last summer. Because Didi was linked through WeChat, I
couldn't use it without a Chinese bank account.
When I finally did get a taxi, the driver gave me a fake
50 yuan bill in change. Several stores also claimed three of my 100 yuan bills
from a New York money exchange were counterfeit. If I could participate in the
cashless society, I would not have lost about $50.
The growth of mobile pay in China has supported another
business: bike sharing.
Led by a few start-ups, the number of bikes stacked along
the side of the street or sometimes scattered even alongside highways in China
has exploded. The number of monthly active users doubled from February to more
than 20 million in March, according to TrustData cited by Hillhouse Capital.
Two of the largest Chinese-based start-ups, Ofo and
Mobike, say they have a combined more than 13 million bikes around the world
and have each raised at least $1 billion.
Incidentally, Mobike entered the U.S. on Sept. 20 by
deploying bikes in Washington, D.C., while Ofo made its first foray into the
country by launching in Seattle in August.
The dominance of mobile pay also means companies like Ant
Financial and Tencent have access to hordes of personal data. That data can
then be shared with the Chinese government, which prioritizes control. Some
parts of China have been testing a personal credit score system linked to
mobile pay data.
But unless privacy issues have immediate negative
consequences, convenience may trump all. A smartphone is increasingly the only
thing someone in China needs to carry when going out.
Disclosure: Travel to Asia was supported by the East-West
Center, the Better Hong Kong Foundation and the All-China Journalists
Association.
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