In a surprising turn of events, China, the country that introduced paper money to the world is now on track to phase out cash.
Apparently, China has been relying heavily on smartphones to make payments and other financial transactions. According to Paul Mozur of the New York Times, almost everyone in major Chinese cities is using a smartphone to pay for just about everything.
Outside business establishments, placards and posters with QR codes are posted to let people know they are accepting mobile payments. Even cigarette vendors found in street corners are accepting this cashless payments.
Bars located in Sanlitun, a popular bar area in Chaoyang District, Beijing, accept cash but consider smartphone payment as their primary option.
China’s population has already reached 1.3 billion. Out of that figure, over 700 million people or 51.7% of its total population are smartphone users according to Newzoo Global Mobile Market Report 2017.#China is going #cashless because of smartphone payment. Goodbye paper money!Click To Tweet
In 2016, Chinese people spent a combined total of $5.5 trillion USD through mobile payment platforms, an amount which is 50 times more than what Americans spent.
China is Going Cashless Because of Alipay and WeChat
WeChat, the messaging platform run by Tencent, and Alipay by Alibaba are two of the major players in the rise of China’s mobile payment industry.
WeChat was launched by Tencent in 2011 as a mobile application software that offers instant messaging and payment services. To date, the application has listed over 900 million active users, and more than 10% of these active users are making payments, in excess of 5,000 RMB, through WeChat.
Alipay, WeChat’s number one rival, is considered a third-party online payment platform. It was launched by Jack Ma‘s Alibaba Group in 2004. With a reported 54.1% share of China’s third-party online payment market, it sits at number one, followed only by Tenpay and Tencent’s WeChat.
With the sudden boom of China’s FinTech industry, financial analysts were surprised with how quickly the transition happened.
Richard Lim, managing director of venture capital firm GSR Ventures, said:
“From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China.”
Almost everyone in China is taking advantage of the convenience offered by Alipay and WeChat’s mobile payment schemes.
QR codes are everywhere–in establishments, public transportation, restaurants, and even the musicians playing on the streets. Shiv Putcha, analyst at the IDC research firm, said:
“It has become the default way of life now. Literally every business and brand in China is plugged into this ecosystem.”
This new payment trend is not hard to notice.
According to reports, every lunchtime in Beijing, long lines of customers are busy waggling their phones over tills with a “beep.”
No cash or credit cards needed.
In eastern Shandong province, panhandlers are seen to have QR codes hanging around their necks.
China and its Highly-Controlled Online Environment
With China’s famous ‘Great Firewall‘ blocking globally renowned social media giants like Facebook and Instagram, it became easier for Chinese companies like Alibaba and Tencent to manipulate the market.
People have fewer options because of the country’s highly-controlled online environment. These restrictions made it easier for the few companies to set monetary trends. The rise of WeChat and Alipay has contributed a lot in shaping China’s current payment industry and shifting the country away from paper money.
China was the first nation to introduce the use of paper money to the world. It was during the Tang Dynasty (A.D. 618-907) that Chinese people started carrying privately issued bills of credit or exchange notes.
The country’s already been using it for more than 500 years before Europe adopt the practice in the 17th century.
China was the first to utilize cash, and now, the country will be the first to shift away from it.
Currently, 92% of Chinese people from the country’s biggest cities are using WeChat and Alipay as their primary method of payment. Cash payment then follows at 39%, and debit/credit card at third place.