A 2022 survey revealed that an estimated 911 million people in China paid for items through their mobile devices, with numbers increasing rapidly after Covid-19. This, along with many other new technological advancements, suggests that China may be on their way to being the world’s first cashless society.
China not only has a plethora of digital apps, where people can pay for items via their phones, but also has introduced new ways of paying through a person’s fingerprint or facial recognition.
Although the People’s Bank of China have explained that moving towards digital payments could have benefits such as the reduction of fraud and money laundering, some researchers are concerned about the privacy aspect of being able to access a bank account solely through a fingerprint which is why China’s Personal Information Protection Law was introduced in 2021.
China has two main apps leading this digital money revolution: Alipay and WeChat Pay. Introduced in 2008 by Alibaba (a Chinese technology company) Alipay is a digital app or wallet, where people can transfer money or buy items via their mobile phones. For instance, a user might scan a QR code in a shop, and the payment is then completed through their phone as they have a bank card linked to their digital device. Alipay states that they have an ‘accessible digital payment for everyone’ suggesting that the software is easy for most people to use, which could explain the app’s booming popularity, with over 1.3 billion people using it worldwide.
WeChat Pay is a similar app but linked to the WeChat social media platform and was launched by technology giant Tencent in 2016. Users can send money directly through the messaging platform. Growing rapidly, from 300 million users in March 2016 to reaching 1.6 billion users monthly in 2023, WeChat Pay is changing the way payments are made in China. WeChat Pay also offers QR code payments, that are available both online and offline.
A newer, and different way, of controlling money was rolled out to the public in China in 2020: the e-CNY, the name for the digital yuan. This had been in development since 2014, and has already totalled over 950 million transactions, a huge number considering it is currently mainly being used for domestic purposes. This digital currency was developed by the People’s Bank of China and is of the same value as the Renminbi or Chinese Yuan, the official currency of China.
This new digital era of payments raises the question of whether cash is needed in China, as the estimated percentage of people paying with cash in 2020 was only 25.4% suggesting that cash may well be on its way to becoming a thing of the past.
New methods of paying
Digital payment is not the only thing changing how people pay in China. New technology has brought in new payment methods, through fingerprint and facial recognition.
Self-service checkouts are used world-wide, but China has gone one step further. Alibaba introduced the world’s first-ever facial recognition payment system in 2017, named ‘Smile to Pay’. To use this, customers first need to link a picture of themselves to their bank account or digital payment account and then when buying something in a shop all they need to do is stand in front of the payment camera and once their details are recognised, the payment is taken automatically.
Once again, the main competitor Tencent, followed with similar technology in 2019 a facial recognition system called ‘Frog Pro’. Tencent has also launched palm payments in Beijing, which is a similar concept, but people use their unique fingerprints to pay rather than their faces. This has proven popular with passengers on the metro who, even if they forget their cash or bank cards, can still travel. This is a similar concept to how we use apps on our phone to pay for local bus tickets, such as Stagecoach, in the North West.
This, combined with the move to digital payment apps, could see the extinction of cash in China, especially due to how fast these methods have been adopted by citizens. However, concerns have been raised recently regarding privacy and potential government surveillance of digital apps and transactions.
Advantages to a cashless society
There are advantages to a cashless society; for example the People’s Bank of China has noted that digital currency would help reduce money laundering and corruption as digital money is traceable, unlike cash. The Access to Cash Review revealed how criminals are more likely to rob businesses which use cash, meaning the risk of robbery is reduced in a cashless society.
Using digital ways of paying also allows people in rural areas to access banking and opens up new income sources for them to market their crops and produce online. In addition, they could also buy goods online which may be hard to access in person if they live far from the city.
A cashless society may therefore benefit those in rural areas, help decrease crime and be faster and more convenient for everyone. If you forget your wallet or cash, this new technology means you can still pay for items or travel more easily.
Problems with a cashless society
While there are advantages to a cashless society and using digital payment methods, such as increased convenience and decreased risk of theft, there are also some potentially negative consequences.
In 2019, SenseNets, a Chinese facial recognition company had their databases revealed to the public as they did not set up a password to protect the details. This resulted in private information being leaked, including people’s addresses, bank details and IDs – all of which could then be at risk of being stolen. If something like this were to reoccur with the increase of facial recognition payment systems, many more people would be at risk of their bank accounts and banking details being accessed.
Another concern relates to privacy invasion by the government. Technology giants Tencent and Alibaba, have data on what anyone has ever bought using their apps, and some citizens view this as a form of monitoring. In China, an individual’s social credit system is linked to everything. There are concerns that if a citizen is critical of the government, this may limit their ability to buy things or to travel. In 2019, China stopped millions of people from buying train or train tickets through their social credit system which has been introduced to improve the behaviour of people living there. Those blocked from travelling may have committed minor offences such as smoking on a train. In 2018 China’s National Development and Reform Commission reported that 128 people were banned from leaving China due to unpaid taxes. Therefore, the government can be seen to control how people live their lives through digital devices.
China’s central bank has asked for the wider acceptance of cash payments as they are concerned about the number of elderly people who may end up being ‘left behind’ given they are less able to adapt to new technology. However, the use of digital payment methods is now so widespread in the country that some places even refuse to accept cash.
The future and the rest of the world
Digital payments are increasingly dominating China at the moment and has already begun in other countries. A study showed that 60% of Chinese respondents used Alipay to complete transactions whilst travelling overseas and tourists to China can also take advantage of Alipay by scanning QR codes and completing the transaction on their phones.
The top ten countries were ranked by real-time payments transactions (instant payments which are made online) in 2020 and although China was in the top three, India was leading the way, the highest among all other countries with 25.48 billion transactions. America has also seen a ‘cash crash’ since 2017 as payment apps such as Venmo and credit cards gained in popularity.
As other countries get a taste of the digital revolution, China may not be the only country on its way to becoming a completely cashless society.