A cashless future?

By Yu Xi Source:Global Times Published: 2017/8/15 17:43:39

Dominance of mobile payments won’t cause cash to vanish, instead, a wider range of methods will be used: experts

There is wide discussion among Chinese consumers over whether China should adopt a cashless society. Experts agree that the rising use of mobile payments will continue on an upward trend, but cash will not disappear. In the long term, various payment methods, such as bank cards and non-banking mobile payments, will continue to be used in China. And merchants should respect consumers' payment habits, experts advise.

Consumers pay for their purchases with Alipay at the Hema store in Beijing's Chaoyang district on August 3. Photo: CFP

Liu Jia, a 30-year-old white-collar worker in Shanghai, rarely carries cash around with her. She spends about 4,000 yuan ($599.8) per month on many things, from transportation to a cup of coffee, via either Alibaba Group Holding's Alipay or Tencent Holdings' WeChat Pay.

"It's troublesome for me to carry a wallet when I go out," Liu told the Global Times on Monday.

Liu believes that mobile payments have accounted for a large part of urban residents' daily expenses and that the trend will continue.

Wan Xiaoxiao, a 29-year-old white-collar worker in Nanjing, capital of East China's Jiangsu Province, also spoke of similar experiences. "I seldom use cash now. It's convenient for me to check my purchase history via mobile payments."

Both Liu and Wan are representative of the young generation who is increasingly storing less and less cash in their wallets. In Shanghai, even senior citizens are starting to buy daily commodities at the community stores with their mobile phones.

But is China ready for a cashless society?

Cashless trend

Experts agree that it is becoming a growing trend that more and more consumers across the country are using cashless payment methods.

In fact, as early as 1988, the State Council, the country's cabinet, released regulations to encourage bank transfers and to reduce using cash during economic activities.

Today, the move toward a cashless society could "reduce the risks of using cash, save on costs and as a matter of convenience, prevent illegal activities such as money laundering," Dong Ximiao, a research fellow at Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times on Sunday.

Cashless payment tools include bank cards and third-party mobile payments.

The rapid development of third-party mobile payment tools, to some extent, is helping to boost cashless payments across the country, said Dong.

Transactions involving third-party mobile payments rose 46.8 percent in the first quarter of 2017 compared with the previous quarter to 18.8 trillion yuan, according to a report Beijing-based research consultancy Analysys released in May.

There were 3.4 billion third-party payment accounts in total in China in 2016, a Goldman Sachs report showed.

But China is not the first country to seek a cashless society. Developed states like Sweden, Denmark and Singapore are also witnessing cashless payment methods proliferate.

Disputes and criticisms

The rapid development of cashless payments does not mean there are no challenges and criticisms.

Alibaba's Hema store, where customers can shop, dine and order commodities for delivery from their mobile phones via Alipay, have come into the spotlight recently. Media reports alleged that consumers can't purchase goods with cash there, which would be considered illegal.

A  Hema PR representative, who prefers to remain anonymous, told the Global Times on Thursday that all 13 Hema stores in the country do in fact allow consumers to pay in cash. She noted that Hema store simply recommend consumers to pay via Alipay for convenience purposes.

Alipay and WeChat Pay, the nation's two major third-party mobile payment tools, also launched campaigns this month to encourage more merchants and customers to use cashless payment methods.

Within the campaigns, both called for the establishment of a "cashless society", which provoked concerns over whether cash will soon disappear.

An insider from the People's Bank of China (PBC), the country's central bank, confirmed with the Global Times on Thursday that the PBC hasn't yet released notices forbidding merchants from using the word "cashless" in promotions.

But any merchants who refuse to accept cash (yuan) is definitely illegal, Dong, the research fellow, emphasized. Money regulations have clarified that all institutions and individuals should not refuse to accept cash (yuan) as a form of payment in China.

"[Some] offline sellers refuse to accept cash, which impacts the natural circulation of yuan," said Dong.

The Wuhan branch of the PBC, in Central China's Hubei Province, disclosed its telephone number to the public on August 2 to encourage consumers to report illegal activities such as refusing to accept cash.

Dong emphasized that a cashless society would not mean that cash would completely disappear. As the economy grows, the circulation of cash is still very huge, noted Dong.

The balance of cash in circulation was 6.83 trillion yuan in 2016, up 8.1 percent year-on-year, data from the National Bureau of Statistics showed.

Even in some developed countries which have made efforts for years to promote cashless societies, cash is still there, said Dong, noting that it's impossible to make cash disappear in China.

Also, it's important to remember that nearly half of China's population lives in rural areas, especially in undeveloped western regions, and therefore is not able to enjoy innovation brought by the Internet, Dong said.

And when it comes to China's senior citizens, most of them prefer to use cash in their daily lives, he added. 

By the end of 2016, senior citizens above 60 years old in China accounted for 16.7 percent of the total population, according to data from the Ministry of Civil Affairs.

It's also still up for debate whether Alipay and WeChat Pay have disobeyed anti-monopoly regulations via providing subsidies and cooperating with local governments in promotions, noted Dong.

In the first quarter, the market shares of Alipay and WeChat Pay were 53.7 percent and 39.5 percent respectively, according to Analysys.

With regard to relevant anti-monopoly regulations, if these merchants were to abuse their dominant market positions, they could be punished for breaking the law.

Tolerant stance

However, some experts show a tolerant stance toward mobile payments.

"Mobile payments drive financial innovation and help to build a cost-effective society," Wang Pengbo, a finance industry analyst at Analysys, told the Global Times on Sunday.

He believes that it's "ridiculous" to question digital payment tools' contribution toward financial development. He said that people should be more tolerant toward emerging mobile payment platforms.

"Under [applicable] regulations and laws, the country should continue to encourage the development of mobile payments," advised Wang.

A PR representative from WeChat Pay, who wishes to remain unnamed, also told the Global Times that the development of mobile payment platforms is not to replace cash.

In the long term, various payment methods will be used by consumers, predicted Dong. "[Ultimately], merchants should respect consumers' payment habits," Dong noted.


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