- China stands as a pioneer in the adoption of cashless transactions, driven by industry giants like Ant Group and Tencent Holdings, with Alipay and WeChat Pay leading the charge.
- While a cashless society offers benefits like reduced money laundering and enhanced convenience, concerns over privacy and inclusivity must also be addressed.
- Ultimately, the journey towards a cashless society necessitates a delicate balance between innovation and safeguarding individuals’ rights and access to financial services.
Ever fantasised about stepping out with just your phone, leaving behind cards, cash, coins, and wallets?
Step into China, where this vision is already a daily reality.
In China, electronic payments have become ubiquitous, with a surge in adoption witnessed during the COVID-19 pandemic. According to a 2022 Statista survey conducted by a German data company, a remarkable 911 million Chinese consumers embraced mobile payments for their purchases.
Moreover, at the forefront of this evolution stand industry titans such as Alibaba and Tencent Holdings, spearheading initiatives to streamline payment processes for both domestic inhabitants and international travelers traversing the mainland.
It’s a digital odyssey, where convenience meets innovation at every tap and swipe.
Digital payment giants
In China, digital payments through mobile applications have mostly been driven by Tencent and Alibaba, especially because of their successful collaborations with retail platforms.
Alipay, launched in 2008 by Alibaba, a Chinese technology company, functions as a digital wallet or app enabling users to transfer money and make purchases using their mobile devices.
Alipay claims to offer “accessible digital payment for everyone,” implying that the software is user-friendly for the majority of individuals. This app now has over 1.3 billion users worldwide.
Similar in nature, Tencent, the digital behemoth, released WeChat Pay in 2016, which is connected to the WeChat social media network.
Users have the capability to send money directly within the messaging platform. The platform has experienced rapid growth, surging from 300 million users in March 2016 to a monthly user base of 1.6 billion by 2023.
Both payment methods provide QR code payment options, accessible both online and offline.
In 2020, China introduced the digital yuan, or e-CNY, to the general population as a new and alternative method of managing money. Since its creation in 2014, more than 950 million transactions have been made with this.
The People’s Bank of China developed this virtual money, which has the same value as China’s official currency, the Chinese Yuan.
Also read: JD wins antimonopoly lawsuit against Alibaba, rewards consumers with $140 million
Unlocking the advantages of a cashless world
A cashless society offers benefits.
The People’s Bank of China has observed that since digital money is traceable unlike cash, it might aid in the reduction of money laundering and corruption.
Technological developments like biometrics, which identify and analyse a person’s unique physical and behavioral traits, make fraud and duplication more challenging.
Cashless transactions bring heightened convenience to the everyday handling of finances, benefiting both individuals and businesses. The necessity of storing, safeguarding, withdrawing, and depositing physical currency becomes obsolete.
The surge in cashless payments during the pandemic also represents a substantial long-term advantage.
Transactions conducted through cashless means are notably faster compared to traditional cash transactions. With cashless payments, there’s no need for customers to count bills or coins, and transactions can be completed with just a tap or a swipe. This efficiency not only saves time for both customers and businesses but also enhances the overall customer experience.
John Clark, Product Manager at takepayments, a company that offers payment solutions, commented: “Today, card payments are three times faster than cash transactions. Going cashless reduces queueing time and allows for more efficient service so businesses can process more transactions and make more money and consumers can get on with their day.”
“Today, card payments are three times faster than cash transactions. Going cashless reduces queueing time and allows for more efficient service so businesses can process more transaction and make more money and consumers can get on with their day.”
John Clark, Product Manager at takepayments
Pop quiz
What industry giants are leading the transition to a cashless society in China?
A. Visa and Mastercard
B. Alibaba and Tencent Holdings
C. Apple and Google
D. PayPal and Square
The correct answer is at the bottom of the article.
Issues in a cashless society
Cash enables anonymous purchases, shielding buying habits from scrutiny. Without digital payments, every transaction would leave a trace. While some may not mind, many individuals are concerned that governments or corporations could exploit purchase histories to surveil, monitor, or even coerce.
Senior citizens, often having less exposure to modern technology, may find themselves less adept at adapting to cashless transactions compared to younger generations. This can stem from a lack of familiarity with digital payment systems and the convenience they offer.
Debit card purchases are perceived by many as being harder to regulate. When there isn’t a set amount of money in your pocket or purse, it is far too simple to spoil, which is why good budgeting is crucial.
Also read: John Collison, Stripe cofounder: Stay calm and keep buying online!
The rest of the world
“There is no right or wrong way to go completely cashless.We shouldn’t force people to switch to cashless; instead, we should work to create an ecosystem where cash and digital transactions co-exist and meet consumers’ needs in various ways.”
Diana Zheng, Head of Marketing at Stallion Express
These days, digital payments are starting to take off outside of China and are already being used in other nations.
As per Statista, 60% of Chinese respondents used Alipay to finish purchases when they were traveling abroad. Visitors to China may also use Alipay by using their phones to scan QR codes and complete transactions.
Sweden is another country recognised for its cashless society, where digital payments account for nearly 85% of transactions.
Should every nation consider transitioning to a cashless economy, given the advancements in digital technology and the potential benefits it offers?
It’s essential to weigh the potential benefits against the impact on marginalised populations and individual liberties, ensuring that the transition is both feasible and equitable for all segments of society.
As Diana Zheng, Head of Marketing at Stallion Express, a Canadian eCommerce platform, said: “There is no right or wrong way to go completely cashless. While digital transactions have clear advantages, ensuring they’re inclusive and address privacy concerns is important. We shouldn’t force people to switch to cashless; instead, we should work to create an ecosystem where cash and digital transactions co-exist and meet consumers’ needs in various ways.”
All in all, it’s all about balancing innovation and protecting people’s rights and access.
The correct answer is B, Alibaba and Tencent Holdings.
