The future is cashless and very much here, well, it is if you’re in urban China. No other nation has so rapidly adopted cashless payments than the Chinese. They have transitioned from wads of renminbi notes to cashless payments as the primary transaction method in less than five years – an unprecedented rate of adoption and one which will forever change the landscape of one of the biggest global superpowers.
Mobile is king
If you’re planning on using your credit cards on holiday to, say, Shanghai, think again. Cashless in China translates into using your smartphone to pay. While in Europe your waiter might ask you for ‘cash or card?’, in China it’s ‘Alipay or WeChat Pay?’
Alipay, a direct competitor to PayPal and Apple Pay, currently boasts over 520 million users and that’s before they’ve entered the US or European markets. WeChat, the Chinese Facebook-meets-Twitter hybrid recently hit one billion monthly users, numbers that Twitter’s CEO Jack Dorsey can only dream of.
Everyone is a merchant
But back to your holiday in Shanghai. You’re popping out for some soup dumplings from a street vendor, and you’ll be paying on your phone scanning the QR code provided. As you head back to your hotel you stop and listen to a busker. Gone is the hat or open guitar case to throw a couple of coins in. Instead, they’ll have helpfully provided a QR code. You come across a cafe and decide to get a coffee. It takes you all of two minutes as there’s no queue to pay. In fact, there isn’t even a till, only – you’ve guessed it – a QR code scanner.
With such wholehearted adoption, it’s no surprise that China’s mobile payment market has reached $16 trillion, with $9trillion payments made in 2016 alone. For comparison, in the US there were £116 billion mobile payments in the same year.
Alipay’s and WeChat Pay’s meteoric rise is partially down to the simplicity of its transactional set up. There’s no need for card readers or other hardware, a bank account and personal QR code is all that’s required to receive payments.
First in China, next on your smartphone?
However, the simple set up that -at the backend -completely cuts out banks, could also be the downfall of China’s payment app adoption.
Its consumer market is now nearly entirely dependent on two privately-owned apps, which ultimately control who will gain access. If a Western company would like to sell their product in China, it will now need full WeChat Pay and Alipay integration. On the reverse, a Chinese company selling to a Western audience will need to provide the standard card payment options we expect.
Obviously aware of the problem, both Alipay and WeChat Pay have intensified their bid for the Western market with WeChat Pay rolling out in London’s famous Camden Market, while AliPay recently announced plans to expand their US partnership to an additional 35,000 North American merchants.
Yet banks continue to be apprehensive. Stiff competition from Apple and PayPal remains and in a world of fast-paced, ever-changing technologies, things can shift incredibly quickly.
So the ultimate question remains: who will develop the Western rival app and take on the Chinese giants?