Leading without even noticing, Chinese people living in Tang Dynasty roughly a thousand years ago were among the first in the world to use banknotes. A millennium later, the country has once again taken the lead in a global transaction trend, but this time, China may become the first country to phase out cash.
China’s increasing global economic status and favorable policies have led to the fast development of an almost-cashless society. According to Statistics from the Payment and Clearing Association of China, from 2013 to 2016, the number of transactions made through non-banking mobile apps increased from 3.777 billion to more than 97 billion, with a compound annual growth rate of over 195 percent.
The new payment trend has also caught global attention. Following debut of China’s major cashless payment platform Alipay in Israel in January, the service has expanded to 38 countries and regions, helping over 280 million foreign users to enjoy the convenience of cashless payments.
“This alliance with the leading global brand Alipay constitutes a significant step forward in the credit sector, which will increase clientele for Israeli businesses and expose them to a new market," said Doron Sapir, CEO of the Israel-based credit card issuer Israel Credit Card Ltd., in a statement.
A BOTTOM UP TRANSACTION REVOLUTION
Just like banknotes simplified China’s economic life a thousand year ago, cashless payment has also fundamentally changed Chinese people’s daily life.
According to a survey conducted by Renmin University of China in 2017, 52 percent of the 6,595 respondents said less than 20 percent of their monthly expenditures were conducted via cash, while 74 percent stated that they can live more than a month with only 100 RMB in their pocket thanks to China’s advanced cashless payment technologies.
“Ever since WeChat Pay was launched, I use it for almost everything, even when I buy breakfast at food stalls,” Pu Rong, a 27-year-old female office worker in Beijing, told People’s Daily Online.
Echoing Pu, Liu Sumei, owner of a food stall located outside Hujialou subway station in Beijing’s Chaoyang District, told People’s Daily Online that cashless payment has benefited both customers and vendors, as it can avoid problems such as counterfeit money and accounting errors.
“Customers consider handling bank notes and coins while making food as unhygienic. We used to think about introducing credit card as a payment method, but small vendors like us cannot afford a POS machine,” said Liu.
“Thanks to cashless payment, customers can simply use their phone to pay without any physical contact with us, while we don’t have to bring lots of coins for change. That is a win-win solution for both of us,” Liu added.
Pu and Liu’s opinions are shared by both the Chinese public and enterprises. According to a survey conducted by Tencent Research Institute in 2017, 84 percent of the respondents feel that there is no need to carry any cash, as they can use their smartphones to pay. Cashless payment has also penetrated industries including tourism, entertainment, transportation, and even public welfare sectors. With just a few quick taps, both vendors and customers have grown mutual trust, which helps to promote economic development.
CHINA TAKES NEW LEAD
Though two-dimensional barcode technology, which is the core of cashless payment, was launched in the 1990s and first used in developed countries such as Japan and South Korea, China has become the most important promoter of the convenient transaction method.
“China’s leading position in cashless payment is connected to the country’s growing share of global trade and deepened internationalization of the RMB, as well as the fast development of information technology and infrastructure, while China’s economic vitality is the primary cause,” Wan Zhe, chief economist of the National Development and Reform Commission, told People’s Daily.
According to Wan, China’s growing economy has influenced global payment rules, laying out a solid foundation for the promotion of “Chinese-style cashless payment.” Moreover, Chinese enterprises’ overseas expansion and RMB’s increasing importance in global trade have guaranteed that the country’s cashless payment would enjoy support.
Meanwhile, Chinese authorities have been making efforts to support and regulate cashless payments to ensure a healthy business environment. The People’s Bank of China announced plans in December, 2017 to regulate QR code payments in order to contain risks arising from the popular service, noting that institutions should also enhance their security to prevent data breaches.
“In the old days, due to China’s lagging behind in financial and communication infrastructure, credit cards and bank cards were introduced by foreign nations to us. But with the development of our living standard and technologies, China has already taken the lead in cashless payment,” added Wan.