The future of money in China is quickly moving away from the traditional paper currency, as the majority of people in the main urban centers of the country are now using their phones to pay for almost everything. And with the two major payment technologies, Alipay and WeChat dominating the market, mobile payments are almost totally taking over from cash as a payment option.
Donations to beggars using mobiles
Even the street vendors are taking mobile payments, and huge shopping centers rely mainly on mobile payment apps for their customer purchases. Even beggars and street musicians in China are now using QR codes for donations in the bigger cities across the country. Mobile payments in China has become a way of life, with almost every brand or business in the country being involved in this new ecosystem.
Mobile technology has boomed in China
As short as three years ago, cash was still the major payment option for the Chinese, which shows the rapid move to digital payments for almost everything, from noodles to shopping sprees. In 2016, according to research firm iResearch, mobile payments in the country were valued at around 5.5 trillion dollars. This was approximately fifty times the United States mobile payment market value of 112 billion dollars. The parent companies of Alipay and WeChat, Tencent, and Ant Financial, collect charges from both the consumer and the business for the use of their services. And with no interaction with banks or card readers needed, their overheads are minimal. Tencent has seen a massive increase in revenue for mobile payments and “other services”, reaching 940 million dollars in the last quarter of 2016. Both major providers are now predicted to overtake both Mastercard and Visa in the number of transactions in 2018.
Colleges opt for mobile payments
In major cities such as Tianjin, cash-free campuses allow students to pay for all of their college expenses with their phones, making the student ID obsolete. The apps include their student identification and can be used to make payments for everything from their lunch to their tuition fee. This option, if nationwide implementation goes ahead, can save the colleges more than 44 thousand dollars a year for the production of ID cards, and almost 1.5 million dollars in lost card costs. And the technology is also being used to reduce China’s notoriously long queues in health clinics by improving access to healthcare.
Green finance is the way forward
China is currently piloting its “green finance” project, promoting digital payments as a green finance option because of its efficiency and lack of need for natural resources. According to a World Bank report, governments and businesses can make savings of up to 75 percent by using digital payment options more. China is more receptive to this change than most countries for a number of reasons. With around 12 percent of the unbanked population of the world being in China, a very low number of credit card users, and no “credit rating” system in place, mobile payments means that everyone has access to a mobile “bank account” which they can use almost everywhere in the country.
Scandinavia is promoting cashless options
China is not the only country that is promoting a cashless society. In Sweden, coins and bills make up for just 2 percent of the economy, and in Denmark and Norway, cash has become almost obsolete. In 2015, only 20 percent of the total transaction in the country used cash as a payment option. India is also making its main payment option digital, with few people using cash in the country for almost every transaction. This is in contrast to the rest of the world, where around 75 percent of payments are still in cash.
Credit cards are still a major option
The main difference between Scandinavia and China is the use of credit and debit cards. IN Sweden, cards are still a popular payment choice, as they also are in Denmark and Norway. Cards are rarely used in China and have never been a major option for many people due to the difficulty in obtaining them. The transition in China jumped from cash to mobile, skipping the use of checks and cards almost completely. Mobile payment options are increasing in Scandinavia, though, with more businesses and street vendors adopting the use of digital payments apps on their phones.
China has a locked mobile payment system
This move towards a cash-free world still has its critics, and many foreign businesses are deterred from opening up in China due to the specialized digital payment platforms used. China’s mobile payment population is locked into the two major providers, with no opening for a foreign option within the country. Digital payment options also bring up many privacy and security concerns with the ability to track and restrict payments being a major concern, especially in a country where the government controls everything. But this transition to a cash-free environment is imminent, and other countries need to catch up to stay in the game. The transition can also be a positive one by using the latest blockchain technology to ensure transactions are secure and private.
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