麻豆传媒

CASH is rapidly becoming a thing of the past in China. Consumers have abandoned banknotes in favour of paying with their phones in unprecedented numbers 鈥� and this vision of a cashless economy could well be the future throughout the world.

The country isn鈥檛 alone in rejecting coins and notes 鈥� Sweden leads the world as the most cashless nation as a percentage of GDP 鈥� but its pace of change is accelerating. Since 2013, China has experienced the .

And unlike Sweden, where physical card payments dominate, people in China are paying via local equivalents of messaging services like WhatsApp.

QR codes for Alipay and WeChat Pay, the two most popular such apps, are now ubiquitous in China: in shops, restaurants, metro stations and even among buskers and beggars. Anyone with the app can scan a code with their smartphone to transfer money, without the need for physical cards or chip readers. In 2017, such mobile payments totalled 120 trillion yuan ($17.5 trillion).

The country鈥檚 regulators have scrambled to keep up with the boom. A new e-commerce law came into effect at the start of this year, aiming to give consumers stronger legal protections when they buy through e-commerce apps and social media.

Brian Sui, a doctor who lives in Shanghai, says he hasn鈥檛 used cash in more than two years. 鈥淥ccasionally, if you come across a place that accepts cash only, people become furious. I carry about 10 or 20 RMB [$1.50 or $3] in case of emergency, but I never have to use it.鈥� Virtually everyone he encounters 鈥� even when he visits family in the rural north-east or buys breakfast from 70-year-old street vendors 鈥� has Alipay or WeChat Pay.

鈥淲eChat allows users to pay bills, reserve taxis, book a doctor鈥檚 appointment, order food or shop online鈥�

The ability to perform multiple services is key to the success of these platforms, says Dave Birch of Consult Hyperion, an electronic transactions consultancy. 鈥淧ayments are part of their warp and weft, but what they鈥檙e actually delivering is a massive range of what they call microservices.鈥�

When WeChat was released in 2011, its primary function was as a messaging platform 鈥� similar to WhatsApp. It now has more than a billion monthly active users. Users send text or recorded voice messages to others, but can also seamlessly pay bills, reserve taxis, book a doctor鈥檚 appointment, order food or shop online. All payments are linked to WeChat Pay, a digital wallet incorporated into the app.

Increasingly, individual vendors are selling via WeChat. Many are personal shoppers, called daigou, who live overseas or purchase items to resell in China. Cosmetics from South Korea and Japan are popular, says Sui, as are Australian health and baby products. 鈥淚 only buy from friends,鈥� he says, because so many people sell fake products. One friend, a nurse who often travels internationally to make purchases, earns more selling products via WeChat than she does in her day job.

Sui also uses Alipay many times a day to rent bicycles, buy tickets for films or public transport, and send or track deliveries. To purchase items, he clicks through to Tmall, a shopping site resembling Amazon that is owned by affiliate tech giant Alibaba. Payments are validated using fingerprint, PIN or face recognition. Nearly all of Sui鈥檚 savings are in his Alipay, rather than a bank account, because the interest rates are higher.

In Alipay鈥檚 healthcare section, you can chat to doctors for basic medical advice, search for nearby defibrillators or look up the vaccine number of an injection, to check that the manufacturer is genuine.

These platforms have achieved success thanks to the explosive growth of smartphones, and to China鈥檚 conservative banking system, says Hans Hendrischke, who studies Chinese business and management at the University of Sydney, Australia.

鈥淭he banking system largely was set up to serve state-owned enterprises鈥� they had very little incentive to look into consumer finance,鈥� says Hendrischke. 鈥淭hat was the gap where Alibaba came in, first setting up a payment system and on that basis starting a whole financial infrastructure.鈥�

Now, trials are under way to link that infrastructure back in to the state. The Chinese government is piloting its Social Credit System, a reputation score that assesses citizens鈥� economic and social circumstances and is linked to payment and electronic banking systems.

The system has been described as dystopian in Western media reports, but this is perhaps overblown. 鈥淚n a sense, there wasn鈥檛 really an efficient national credit system. They鈥檙e now trying to set one up,鈥� says Duncan Clark, chairman of BDA China, a business advisory firm in Beijing. 鈥淚t鈥檚 a bit like our banking system where you get a credit rating if you apply for a mortgage,鈥� says Hendrischke.

Social credit

Alipay鈥檚 Sesame Credit service was the first to popularise this concept, says Clark. It gives users an individual credit rating based on transactions and other information. Users with high scores receive benefits such as being able to rent a bike without paying a deposit, he says.

Such systems are taking off because they offer convenience and security. 鈥淚f I want to steal your money, that means I鈥檝e got to steal your phone,鈥� says Birch. 鈥淚t probably also means I鈥檝e got to steal your face or your fingerprint, and that鈥檚 hard enough.鈥� Passive biometrics such as facial or voice recognition and data on location and movement, for example, add another layer of assurance.

So as its private and public banking systems become increasingly connected, China鈥檚 system offers a glimpse of the cashless future: intrinsically linked to your phone and fully integrated with society.

This future is unevenly distributed. As of 2017, about two-thirds of people in China鈥檚 rural areas didn鈥檛 have access to the internet. But that is changing.

鈥淐hina鈥檚 urban market is pretty much saturated,鈥� says Clark. 鈥淥ne of the big growth areas has been in rural or lower-tier cities,鈥� he says, via use of apps like Pinduoduo, a popular Groupon-like shopping platform. And mobile connectivity is on the rise in rural areas. 鈥淚鈥檝e been on a camel 2 hours from Hotan in Xinjiang province and still had a [4G] signal,鈥� says Clark. 鈥淭here is no escape.鈥�

Efforts such as training courses are also under way to ensure that , who may be less familiar with technology, don鈥檛 get left behind. WeChat already has more than , its scan-and-tap payment structure is simpler than the bureaucratic banking system, says Hendrischke. 鈥淔amilies could put some few hundred yuan in the WeChat account of their grandmother and she would take her phone and pay with that.鈥�

Alipay and WeChat Pay already reach beyond China, when they compete for the commerce of Chinese tourists abroad. Both platforms now accept payments in multiple countries, including the UK and US, and have formed partnerships with retailers to subsidise discounts. In Europe, certain retailers, including Harrods in London, will directly refund VAT if payment is made through the Alipay app.

Hendrischke believes the Chinese model will inevitably be replicated internationally out of convenience. But whether people outside China take up the likes of WeChat remains to be seen, he says. Data protection issues may pose a stumbling block. And earlier this year, Alipay鈥檚 parent company, Ant Financial, was government from acquiring US money transfer company MoneyGram over security concerns.

鈥淚f I want to steal your money, that means I鈥檝e got to steal your phone, your face and your fingerprint鈥�

Other tech giants may end up beating the Chinese innovators to global dominance. In 2017, Apple Pay launched a marketing campaign targeting Chinese consumers. And in 2018, Google released its Pay app, unifying its previous Android Pay and Google Wallet systems into one platform. The app, like its Chinese competitors, incorporates peer-to-peer payments, and integrates with third-party services. In India, Facebook is testing a money-transfer system for WhatsApp, which it owns.

So, as the cashless future arrives, governments need to start planning 鈥� and ensure no one gets left behind, says Birch. 鈥淲e need to make sure it鈥檚 inclusive, so the benefits are spread across everybody.鈥�