China cash­ing out as mo­bile pay­ment soars

Kuwait Times - - INTERNATIONAL -

Yang Qian­qian holds out her smart­phone to scan a bar­code on the mo­bile of a ven­dor sell­ing fresh fruit and veg­eta­bles at a bustling out­door mar­ket in Bei­jing. The dance stu­dent is part of an ex­plo­sion in the use of mo­bile pay­ment plat­forms in China as con­sumers in­creas­ingly take out phones in­stead of cash to pay for ev­ery­thing from a cof­fee to a lan­guage class or a gas bill.

“Even though I have cash on me it’s not con­ve­nient to get it when I am car­ry­ing a lot of bags,” said Yang, 25, clutch­ing plas­tic bags filled with pears, pota­toes and wa­ter­melon. China was the first coun­try in the world to use pa­per money but cen­turies later the soar­ing pop­u­lar­ity of mo­bile pay­ment has some an­a­lysts fore­cast­ing it could be the first to stop.

The gross mer­chan­dise value of third party mo­bile pay­ment rose more than 200 per­cent to 38 tril­lion yuan (about $5.6 tril­lion) in 2016 from a year ear­lier, ac­cord­ing to China-based iRe­search. The growth of the cash-free sys­tem has been sup­ported by China’s rapidly ex­pand­ing e-com­merce mar­ket as Chi­nese shop­pers in­creas­ingly shun bricks and mor­tar stores. “I think it’s re­ally very pos­si­ble that China be­comes the first or one of the first cash­less so­ci­eties in the next decade,” said Ben Caven­der, a di­rec­tor at China Mar­ket Re­search Group. Caven­der es­ti­mates China’s mo­bile pay­ment mar­ket is al­ready 40-50 times larger than the United States.


Ali­pay, started by e-com­merce gi­ant Alibaba and now owned by its af­fil­i­ate Ant Fi­nan­cial, and WeChat Pay, which is built into Ten­cent’s pop­u­lar mes­sag­ing ser­vice, have hun­dreds of mil­lions of users be­tween them and are China’s dom­i­nant pay­ment plat­forms.

In Bei­jing it is hard to find a prod­uct or a ser­vice that can­not be pur­chased with a mo­bile. At the fresh pro­duce mar­ket, stall­hold­ers dis­play bar­codes on ta­bles laden with fruit and veg­eta­bles for cus­tomers like Yang to scan-though many shop­pers ap­peared more com­fort­able with cash.

“Peo­ple at my age don’t dare to use it,” said a woman in her 50s. Some restau­rants in the cap­i­tal no longer ac­cept bank notes while it is com­mon for mo­tor­bike taxis, street food carts and hair sa­lons to of­fer mo­bile pay­ment. Mo­bile ac­counted for eight per­cent of the to­tal value of re­tail pay­ments in 2015 and is ex­pected to reach 12 per­cent in 2020, ac­cord­ing to a re­port pub­lished in April by UN-backed Bet­ter Than Cash Al­liance.

But cash is still king in China-al­though less so than it used to be. The Bet­ter Than Cash Al­liance ex­pects cash’s per­cent­age of the value of re­tail pay­ments to fall to 30 per­cent by 2020. It stood at 61 per­cent in 2010. A key at­trac­tion of mo­bile pay­ment is con­ve­nience.

Peo­ple can carry lit­tle or no cash and avoid the prob­lem of their debit or credit card be­ing re­jected due to the lim­ited num­ber of point-of-sale ter­mi­nals in stores. China’s rel­a­tively short his­tory of us­ing bank cards also makes con­sumers more open to new tech­nol­ogy, said Martin Utr­eras, vice pres­i­dent of fore­cast­ing at eMar­keter. “In China a lot of peo­ple never had any fi­nan­cial in­stru­ments that were au­to­mated in any way and the first thing they had was mo­bile pay­ment,” he said.

‘Hands off’

But some have been re­luc­tant con­verts to the cash­less sys­tem. Among them is a 63-year-old woman sur­named Song who sells hand-knit­ted sun­flow­ers and peashoot­ers from the pop­u­lar video game Plants vs Zom­bies in a pedes­trian un­der­pass in Bei­jing. She prefers cash but ac­cepts mo­bile pay­ment be­cause some cus­tomers do not carry real money. “Cash is more con­ve­nient for me be­cause I’m get­ting older and have bad eye­sight,” she said, stand­ing next to her bright-col­ored or­na­ments neatly dis­played on the ground.

Rid­ing on their suc­cess, pay­ment providers are ex­pand­ing their busi­nesses to of­fer con­sumer and busi­ness credit scor­ing, short-term lend­ing and even in­vest­ment prod­ucts. The shift fits with the Chi­nese gov­ern­ment’s do­mes­tic agenda of boost­ing con­sumer spend­ing and in­creas­ing ac­cess to fi­nan­cial ser­vices among or­di­nary peo­ple.

Alibaba and Ten­cent are also tak­ing their tech­nol­ogy-and deep pock­etsabroad as they tar­get cashed-up Chi­nese tourists and nascent pay­ment mar­kets in de­vel­op­ing coun­tries.

Ten­cent ear­lier this month teamed up with Ger­man pay­ments com­pany Wire­card to launch WeChat Pay in Eu­rope where Ali­pay is al­ready avail­able. Se­cu­rity of mo­bile pay­ment is a grow­ing con­cern, how­ever, af­ter re­ports of crim­i­nals re­plac­ing real bar­codes with fake ones car­ry­ing soft­ware that steals per­sonal in­for­ma­tion or drains users’ bank ac­counts.

Author­i­ties are still work­ing out “the right bal­ance be­tween in­no­va­tion and reg­u­la­tion”, ac­cord­ing to Bet­ter Than Cash Al­liance, but they have been “more ac­tive” in tak­ing steps to re­duce fi­nan­cial risk and fraud. “The gov­ern­ment doesn’t want to slow down adop­tion... that’s why they have kept their hands off,” said Caven­der.


BEI­JING: This file photo shows a woman mak­ing pur­chases by scan­ning QR codes us­ing her smart­phone at a fruit stall in a mar­ket in Bei­jing. China was the first coun­try in the world to use pa­per money but cen­turies later the soar­ing pop­u­lar­ity of mo­bile pay­ment has some an­a­lysts fore­cast­ing it could be the first to stop.

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