Virtual wallet boom could mean cash is checking out

Beset on all sides by disruptive technologies, cash is becoming less popular as fewer people use notes and coins on a daily basis.

While cryptocurrency proponents disdain fiat currency, their decentralized utopia is most likely decades away. Right now, however, mobile payments are a more immediate threat to old-fashioned cash.

The trend is taking place on an accelerated basis in China, as most tech transformations do. The China Internet Network Information Center reported the country had 527 million mobile-payment users in December 2017, up 12.3 percent year-on-year.

Mobile payments are a daily fact of life on the mainland, although it’s still wise to carry a little cash in case the mobile reception is poor. Whether it’s paying for a taxi, groceries, bike-share subscriptions or street food, mobile payments are the way to go.

So much so in fact, the People’s Bank of China, the central bank, vowed this year to ensure vendors still accept customers’ cash, as they are obliged to, to protect the consumer’s “right to choose their mode of payment”. But Chinese shoppers are not only splashing the cash (virtually) at home. More overseas outlets are accepting Chinese mobile payments. I experienced the phenomenon firsthand this National Day break, on a trip to South Korea.

Being on holiday often means the frustrating return to counting out unfamiliar notes and coins in colors and sizes that seem ridiculous to the inexperienced — but not for vacationing Chinese.

The logo of Alipay, Alibaba’s virtual wallet app, was proudly displayed on a wide variety of checkouts: cosmetics stores, cafes, department stores. Just a scan of a QR code and a fingerprint confirmation, and the bill was settled. No need for a bulky wallet, and no embarrassed fumbling with cash, marking you as an outsider. However, the system seems to falter at airport duty-free stores unless you have a Chinese ID.

Tencent’s WeChat Pay, Alipay’s archrival, also has aspirations overseas. Grace Yin, director of international operations at WeChat Pay, said this year the payment service is already available in over 40 countries and regions in 13 currencies.

The two virtual wallets share 90 percent of China’s domestic mobile payment sector.

But amid this globalizing consumption upgrade, China’s unbanked population remains a concern. A bank account and smartphone are prerequisites for joining the heady world of mobile payments, and both are beyond reach for many rural poor, many of whom live in isolated regions. As such, not all of China’s residents are currently able to participate in the transition away from cash, one factor prompting the central bank’s concern over vendors’ lowering cash acceptance.

The World Bank’s 2017 Global Findex database estimated that 200 million rural Chinese are outside the financial system.

But the outlook is positive. The multilateral development bank said this year in its report on universal financial inclusion, “China’s rate of account ownership … is now on par with that of other G20 countries,” thanks in part to its world-leading agent banking network.

XU KANGPING / FOR CHINA DAILY An outbound Chinese tourist pays with Alipay at the checkout of a shopping mall in Sydney.