China, the once bastion of cash payments, is making the jump to virtual currency faster than any other country
Figures released from the People’s Bank of China show that alternative forms of payment have risen sharply compared to the country’s acceptance of cash. As the Financial Times reports, there are 4.2 billion bank cards in circulation in China, which is enough for every mainlander to have at least three cards each. But a report from MasterCard seems to suggest that China is making the shift from cash to cashless faster than any other country in the world.
With this rise in digital payments use also comes a myriad of debt and China certainly has its fair share – with overdue credit card debt rising 72 per cent. However, the total figure is only 1.37 per cent of the total credit outstanding in the country, so hardly anything to sweat about.
Still, Euromonitor predicts that credit card usage in the region will grow faster than that of other cards over the next five years, meaning debt will no doubt increase.
China was a nation built on cash and has an almost umbilical connection to paying for goods in cash, so it’s a little surprising to see the shift happen so quickly. Chinese society is so fond of the stuff, with major purchases being made in cash, some of the worlds first bank notes being printed in the region, and an older generation that’s encumbered by wealth due to saving money and avoiding debt.
But why the change?
Well, it’s partly due to rapid urbanisation of the nation, with the government encouraging non-cash payments for goods to help stimulate a more American-style system of lending.
Chinese youth isn’t just adopting the credit card either, with mobile payments soaring in the region, it’s also host to an impressive network of avid mobile payment fans thanks to Tencent’s Chinese New Year WeChat incentive.
Taxi firms seem to be the battleground for the future payments acceptance in the region, and AliPay is winning out at the moment. But still, there’s all to play for in this rather excitable and volatile marketplace.
However, it’s worth remembering that – just as it is in the UK and US – cash isn’t going anywhere soon. The poorer sides of Chinese society still cling to cash, with merchants being more willing to accept it thanks to not having to pay fees for acceptance, and it’s lack of security for tracking purposes – meaning tax evasion is a little bit easier.
What are your thoughts on China’s expansion away from cash?
Is it a good idea that should have happened sooner? Or is the credit card merely a stopgap until something better comes along in the mobile payments space?
[Image: dcmaster - Flickr]