China Can’t Afford a Cashless Society (Perhaps No One Can)

[Hydrogen]

A mania for mobile payments is leaving the poor behind.

As payment by phone accelerates in China, the reach of the biggest digital corporations are making its banking regulators uneasy. In Chinese cities, paying via the ubiquitous WeChat platform is now so common that vendors often have trouble making change for cash, or sometimes refuse to take it altogether. That’s prompted pushback from the state-owned banks. Anhui province’s branch of the People’s Bank of China (PBOC), recently began a working group to tackle the problem. Wang Yazhou, a senior banking official in Hefei, the province’s capital, commented a thorough cleanup was needed because refusing cash payments would be likely to have a very negative impact.

Regulators like Wang are right to be concerned. The growing “cashlessness” of Chinese cities threatens to expose underlying issues of economic instability. Mobile payments are carving out lines between young and old, and between the prosperous urban middle class and those left behind by the boom times. Mismanaged moves to mobile payments by municipalities could also lock the elderly and the poor out of the consumption economy—just when the Chinese government needs as many spenders as possible to drive forward the country’s economic transformation.

The policy question being debated is whether mobile payments can legally substitute for the renminbi, China’s currency. Specifically, regulators are looking to see if “cashless city” initiatives and the like violate China’s Renminbi Management Regulations. This law contains a clause that distinctly defines the renminbi as “the legal currency of the People’s Republic of China” and says that “within China’s national borders, the usage of renminbi for transactions by work units or individuals cannot be revoked.”

At the same time, the numbers suggest that cashlessness is rising and here to stay. January 2017 data reported by the Cyberspace Administration of China showed that 469 million users were registered on a mobile payment platform, and found an increase of 31.2 percent in total registered users compared to 2016 numbers. The China Internet Network Administration Center, another government bureau that collects usage data, indicated that the proportion of mobile payment usage in transactions rose from 57.7 percent to 67.5 percent from the end of 2016 to the end of 2017. In the cities, vendors ranging from brand-name stores to street food stalls have slapped colorful QR Code stickers from Alipay and Tencent—China’s two giant internet firms, which dominate online payments—near cash registers.

Bolstered by these promising numbers, the mega-corporations that run the cashless transactions applications are ramping up promotional events and municipal lobbying initiatives. In the early 2010s, online vendors pioneered “shopping holidays,” events such as Singles’ Day (Nov. 11—four lonely ones in a row) when purchases peaked thanks to deep discounts. The new events build on those, further normalizing cashless payments. In August 2017, Alibaba, Alipay’s parent company, rolled out “Cashless City Week” events in its home city of Hangzhou, as well as in Wuhan, Fuzhou, and Tianjin. Tencent’s WeChat Pay followed suit with a similar promotion that played off the auspicious date of Aug. 8, naming it an annual “Cashless Day.” However, bowing to pressure from Wuhan’s PBOC branch, wording for these promotions were later changed to “better respect consumer choice” in payment platform availability.

In many cities, cashlessness is so common that panhandlers and street musicians use WeChat and Alipay QR codes to ask for change. But these anecdotal cases obscure some of the class-related issues that cashlessness can’t fix, and may worsen. The 2017 World Bank Global Findex database, which measures financial inclusion, estimated that some 200 million Chinese rural citizens remain unbanked, or outside of the formal financial system. Cashless payment systems by design require formal enrollment in banks, which are then tied to the mobile payment platforms that WeChat and Alibaba host.

When apps are built on the assumption that residents of a specific community are formally enrolled in a bank or financial institution, the unenrolled are simply locked out of being able to pay. As a 2017 report from the Consultative Group to Assist the Poor indicates, close to 70 percent of rural Chinese remain offline and require a compelling reason to acquire the smartphone and bank account needed to utilize mobile payments. As these digital platforms attempt to become the default form of payment, China is facing a critical challenge to get its unbanked citizens caught up to financial inclusion standards.

The question of how accessible cashless payments truly are within China is an active, vibrant debate within domestic policy circles. A 2017 op-ed series in the Beijing News raised concerns that shifting invoicing systems to cashless ones without consulting rural communities or individuals would introduce risks: In communities that are cash-only, if individuals find themselves shut out of the financial system, they will be unable to conduct economic transactions related to agricultural equipment, seeds, and other purchases for farming.

Even as regulators and finance analysts worry about these gaps, Alibaba and Tencent remain determined to push cashlessness further into everyday life. Chinese firms are borrowing from the tactics and lingo of Silicon Valley CEOs determined to sell their products as socially valuable. In rural areas, both companies are investing resources and relying on their platforms’ unique characteristics to try to capture potential market shares of rural users of mobile banking products. Alibaba, which grew its revenues via the Taobao shopping site and supply chains, is in the tail end of a 2014 to 2019 10 billion renminbi spending spree to build e-commerce service centers in rural China. Tencent, on the other hand, relies on WeChat’s role connecting migrant workers to family members in rural areas to get more mobile payment users onboard.

Older users are another critical demographic targeted in cashless platform promotion campaigns. Because older users tend to struggle learning to use mobile devices, for example, Alibaba takes advantage of filial piety to encourage children to recruit parents and elders into getting on the apps. In a recent campaign to get more elderly users up to speed on using Alipay, Alibaba mimicked the language of a heartfelt child-to-parent note as an introduction to a tutorial on setting up mobile payments.

Alibaba and Tencent can issue lofty mission statements about bringing more users into the fold. But to them, the size of coverage disparities aren’t an overall problem as long as urban users keep the money flowing through their respective apps. They lose nothing substantial when lower-income, lower-technology, or unbanked users struggle to participate, because mobile transactions are still a massively growing sector. However, PBOC branches do, because lower spending and renminbi circulation reflects poorly on different provinces’ economic numbers—and, eventually, on the economic health of the whole country. When corporate needs and government objectives clash in China, however, the government tends to win. Yet the attraction of investment and the glamor of tech may give the payment firms the leverage they need to keep reaching for revenue opportunities.

How Chinese individuals, businesses, and communities can adapt to the prevalence of ubiquitous cashlessness will determine survival in a burgeoning but unequal digital economy. If China goes cashless without widening the opportunities to participate, the end result may exacerbate economic inequality in China even further—and leave rural provinces frustrated even as the country’s biggest corporations thrive.

https://foreignpolicy.com/2018/09/11/china-cant-afford-a-cashless-society/

....

This piece attempts to blame cash and paper money shortages in china on 3rd party payment apps like Wechat, Alipay and Tencent.

When people hear the term "paper money shortage" what comes to mind? Is this something that is likely to be the fault of private sector enterprise: corporations which build and implement electronic payment networks? Or is it more likely to be the fault of governments who produce and distribute paper money? I would be interested to know peoples feelings on this topic.

Would also be curious to know if anyone that reads this piece feels as if there is "anti-capitalist" sentiment present. Perhaps similar to the anti-capitalist sentiment pushed by venezuela which led to the severe deterioration of its private sector. Followed by loss of jobs, heavily reduced production via corporations in the country, etcetera.

No mention of bitcoin or crypto currencies, here. Should they also be considered in "cashless society" discussions? What are peoples thoughts on this?

[1713959852]

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[nazaididuan1]

China is slowly entering the old society, and young people will soon get used to cashless transactions, but some old people will encounter some problems when using smart phones.
For a long time to come, China's multiple payment and settlement methods will continue to exist together!

[1Referee]

In my opinion it's always the government that should be the one to blame, especially with how you as government are responsible for the fact that there are different levels of economical exclusion. In the last couple of years not even one single thing has been done to at least address the gap between various classes in their economy. It seems to me that they are just thinking that problems will solve themselves, but this is obviously not the case as everyone can clearly see.

And yes, Bitcoin and other crypto currencies should be and are definitely part of the casshless revolution, but in lesser form. The thing is that crypto in general isn't mainstream ready, and you are dealing with significant levels of volatility which isn't helping either. It will remain a niche for at least a couple of more year, and that allows centralized payment platforms to keep gaining dominance.

[pawel7777]

...
This piece attempts to blame cash and paper money shortages in china on 3rd party payment apps like Wechat, Alipay and Tencent.

When people hear the term "paper money shortage" what comes to mind?
<snip>

Paper money shortage is nowhere mentioned in your quote or the article linked. Not sure what are you referring to.
The problem described is quite the opposite. Cash money is becoming unwanted by merchants, which could become a massive problem for estimated 200 million of unbanked Chinese + it undermines Renminbi as a legal currency.

... In the last couple of years not even one single thing has been done to at least address the gap between various classes in their economy.

Are you implying that there shouldn't be any gap and we all should live on the same wealth level?

[davis196]

No countrie in the world (even China and USA) can't afford a 100% cashless society,because the implementation would be very expensive.Cashless society means that everyone needs a mobile device or a personal computer.Paper money are still way more convenient.

[dothebeats]

The willingness and the eagerness of the society itself to transition from a cash-based society to a cashless society is what's actually hurting the unbanked, not the country or the regulators themselves. Knowing how fast, convenient and secure cashless payments are, it's a no-brainer that most people would opt to use it rather than receive coins and paper that could potentially be stolen and hard to get back. The downside is, some people, especially the unbanked are left behind in this cause; it takes a lot of requirements and financial capacity to get yourself banking services.

it's kinda sad to think that there's nothing we can do to bridge the gap between the rich and the poor, and sometimes, compromises hurts all sides of the story, too.

[hatshepsut93]

No mention of bitcoin or crypto currencies, here. Should they also be considered in "cashless society" discussions? What are peoples thoughts on this?

It depends on the context. If the discussion is focusing on the differences in physical and electronic payments from the point of view of people who struggle to use the latter (like the eldery and the poor in this article), then Bitcoin is a part of cashless society. But on the other hand, Bitcoin is not controlled by banks and governments, unlike electronic fiat, it was originally described by Satoshi as electronic cash because he wanted to distinguish it from centralized payment systems, so in this sense Bitcoin is the opposite of cashless society.

[carlisle1]

No countrie in the world (even China and USA) can't afford a 100% cashless society,because the implementation would be very expensive.Cashless society means that everyone needs a mobile device or a personal computer.Paper money are still way more convenient.

There will be no cashless society,this is not happening now and forever as virtual money has a limited power and needed internet to access,while paper money is indeed to be in action anytime everytime as it be in need.Japan accepted bitcoin and make it as legal tender but yet they still uses Yen because of this reasons so btter not to expect a cashless society instead expect a combination of this both in future uses

[kryptqnick]

Not accepting cash is of course worng for now, but I guess the shops should simply hold some funds specifically for giving change to people. I am sure they all know the average number of daily customers, average spedning rate and how much of which banknotes is needed to pay them. It looks more like an illusionary problem. Yes, surely cryptos will count as cahless payment here as well.
I don't see the economical problem with fiat here, since people are mainly using wechat for payments and are probably using it for mibile payments in the same Chinese currency. The issue with poor people without smartphones can also be resolved naturally, because I am sure that poor and wealthy people are shopping in different stores anyway.

[audaciousbeing]

....

This piece attempts to blame cash and paper money shortages in china on 3rd party payment apps like Wechat, Alipay and Tencent.

When people hear the term "paper money shortage" what comes to mind? Is this something that is likely to be the fault of private sector enterprise: corporations which build and implement electronic payment networks? Or is it more likely to be the fault of governments who produce and distribute paper money? I would be interested to know peoples feelings on this topic.

Would also be curious to know if anyone that reads this piece feels as if there is "anti-capitalist" sentiment present. Perhaps similar to the anti-capitalist sentiment pushed by venezuela which led to the severe deterioration of its private sector. Followed by loss of jobs, heavily reduced production via corporations in the country, etcetera.

No mention of bitcoin or crypto currencies, here. Should they also be considered in "cashless society" discussions? What are peoples thoughts on this?

The fact still remains that any country that is campaigning for a complete cashless economy is only living in the world of form as what they are doing is far from reality. There is no way cash can be eradicated. The only thing that can be done is a gradual reduction in it other than the complete one that the Chinese government is going. I remember when such was about to be introduced into the country, it was a gradual one starting from the states that are more populated and focusing on the educated class and two years down the line, some people are still not touched while some citizens don't have any idea of what a cashless economy is all about.

To the people blaming the private sector, I would say its as a result of ignorance. They should channel their energy to the government that came with the policy in which the private sector as law abiding must fall in line if they still want to be in business. The private sector should even be appreciated the more because its on their platforms that they make the transactions possible while government makes the policy, it sometimes fails to put the necessary infrastructures in place to ensure a seamless transition which is what is being witnessed now.

[The Sceptical Chymist]

"Paper money shortage"?  I've never heard that term before, and I think it's a pretty ridiculous concept.  Paper money isn't pegged to gold anymore, so it's not like governments can't just print more.

We're in for a cashless society I think.  I have little doubt about that, and I don't even think it's something governments have to push very hard.  People, from what I've seen, much prefer to use their debit card or smartphone to pay for even the smallest transactions--especially the younger folks.  That article made a good point about the elderly being squeezed out of the economy, but that's a problem that should work itself out with time.  As far ask I know, China has not yet eliminated physical money so those geriatric folks can still spend their paper money.

I don't think Chinese businesses ought to refuse cash payments.  That's nuts in my opinion, but then again China is a nutty society.

As I've said before, I have mixed feelings about going cashless, mainly because of the lack of anonymity with electronic payments.  I don't like that at all.  Plus you're screwed temporarily if you lose your phone or debit card.  It's happened to me when I didn't have cash on hand, and it sucks.

[1Referee]

Are you implying that there shouldn't be any gap and we all should live on the same wealth level?

I nowhere even mentioned that.

My point basically is that governments should stimulate those who aren't capable of catching up with the economical trends themselves. If you look at how the lower class in economical terms hasn't gone through any sort of improvement throughout the last decades, it's safe to say that it won't ever happen if you wait for it. Don't you think the government should be a stimulating factor here?

It's China that we're talking about, so the group of affected people in terms of numbers is more than what we can even think of right now. Imagine what economical boost the Chinese economy will experience when you get those people to 'rank up' and have them be part of the modern economy.

[stompix]

No countrie in the world (even China and USA) can't afford a 100% cashless society,because the implementation would be very expensive.Cashless society means that everyone needs a mobile device or a personal computer.Paper money are still way more convenient.

Sweden is close to that:

Just 2 percent of the total value of transactions in Sweden consist of cash, and this is expected to decline to less than half a percent by 2020, according to research by Capgemini and BNP Paribas.

Of course, those are measured in value so percentage wise based on raw numbers it's close to 10% but still...it can be done.

And China and USA are not the best countries for such a plan, smaller countries with higher density, more urbanized and do this a lot easier. For a total cashless society,my bet would be on Singapore

There will be no cashless society,this is not happening now and forever as virtual money has a limited power and needed internet to access,while paper money is indeed to be in action anytime everytime as it be in need.

20 years ago we had problems with mobile coverage away from the capital over a 10 km radius.
Now I'm cursing the mobile company when I only have 3G in the middle of the forest 100 km away from a village 

Times change

[LeGaulois]

A cashless society doesn't mean mobile payment. ATMs, cards are all part of a cashless society. Scriptural money is one of the best examples. Which country doesn't have a single ATM, nobody with a card? Does a country without a scriptural money exist again?
A poor can even use a Payment terminal https://www.youtube.com/watch?v=Y43kdAgUFNg

[Rath_]

My point basically is that governments should stimulate those who aren't capable of catching up with the economical trends themselves. If you look at how the lower class in economical terms hasn't gone through any sort of improvement throughout the last decades, it's safe to say that it won't ever happen if you wait for it. Don't you think the government should be a stimulating factor here?

How should the government encourage people to start using only digital method of payments? I think that there are a few ways and each country will do it differently. We can either try educating people (expensive and it doesn't guarantee 100% success since many will simply ignore it) or forcing people by switching over completely to digital cash. It will be much easier to do since smartphones are becoming more and more popular along with cashless payments. The elderly are the biggest problem. Most of them still feel unsafe about modern technology.

[pawel7777]

...
I nowhere even mentioned that.

OK, the way you phrased it made me think you see existence of the wealth gap as a problem.

My point basically is that governments should stimulate those who aren't capable of catching up with the economical trends themselves.

My general impression is that vast majority of government stimulations are waste of money, can do more bad than good and are often simply unfair (ie when you take person's A tax money to train and subsidise B, so that B can out-compete A on job market).

If you look at how the lower class in economical terms hasn't gone through any sort of improvement throughout the last decades, it's safe to say that it won't ever happen if you wait for it.

You've lost me here completely. Are you honestly not seeing the progress in western world and globally (with few small exemptions) in terms of quality and comfort of life in the past few decades? No more illiteracy, virtually everyone with access to electricity/water/internet/sewer systems, even homeless junkies have smartphones, and the best one: lack of food is no longer a major problem for the poor - excess consumption and obesity is.

Seriously? No improvement?

...
I don't think Chinese businesses ought to refuse cash payments.  That's nuts in my opinion, but then again China is a nutty society.

It boggles my mind why would any shop keeper refuse to take cash. Even if it's small %, that's always a profit. It could have something to do with either security (higher risk of robbery) or, more likely, strict regulations around handling cash (more complex bookkeeping, you have to make occasional trips to the bank to deposit etc), or maybe it's about counterfeit money risk...

Around here some business would give you small discount if you pay cash and don't require receipt

[Irvinn]

Until recently, the forum gave an example with China, where people quite actively switch to non-cash forms of payment. Yes, until some time the introduction of non-cash payments is useful and necessary. However, no state can fully switch to non-cash settlements in the near future. Also, no society will be able to switch to using only crypto currency. There will always be all forms of calculation.

[pawel7777]

...However, no state can fully switch to non-cash settlements in the near future.

Why exactly? Absolutely vast majority of transactions are already non-cash. All the government needs to do is to make sure everyone is banked, meaning bank (and payment app providers) cannot refuse you as a customer, freeze/terminate your account for no reason.

So the state could do it, but they won't probably for 2 reasons:

- some elderly people have no experience of non-cash technology and it could be to hard for them to switch
- "safety valve", cash is needed for crime (drugs, hookers and alike) and having total control and transparency of people's finance could backfire badly. It's actually healthy to keep some level of non-serious crime and allow people to vent-out.

[pitiflin]

"Paper money shortage"?  I've never heard that term before, and I think it's a pretty ridiculous concept.  Paper money isn't pegged to gold anymore, so it's not like governments can't just print more.

Well,its paying very well isn't it,now that infinite number of dollars are printed and yet the entire world is stuck in a recession. Paper Money shortage means that there's not enough notes in the economy to survive which makes no sense and isn't even a proper term.

We're in for a cashless society I think.  I have little doubt about that, and I don't even think it's something governments have to push very hard.  People, from what I've seen, much prefer to use their debit card or smartphone to pay for even the smallest transactions--especially the younger folks.  That article made a good point about the elderly being squeezed out of the economy, but that's a problem that should work itself out with time.  As far ask I know, China has not yet eliminated physical money so those geriatric folks can still spend their paper money.

We are not in a cashless society. Yeah we use credit cards, paypal,google pay/samsung pay whatever, but paper money runs deep. These digital payments are just a tip of an iceberg. But if this recession keeps going on,cash is gonna get hard to attain, people will only use digital payments and save hard cash, if things become worse,lord forbid.

I don't think Chinese businesses ought to refuse cash payments.  That's nuts in my opinion, but then again China is a nutty society.

Unless china forces them to,they won't. China is nutty, but going cashless won't be the best option for now. They know that they are in a bad place right now.

As I've said before, I have mixed feelings about going cashless, mainly because of the lack of anonymity with electronic payments.  I don't like that at all.  Plus you're screwed temporarily if you lose your phone or debit card.  It's happened to me when I didn't have cash on hand, and it sucks.

What do you mean by lack of anonymity? Cash was never fully anonymous. There could be different Point of views that you maybe talking from, but going cashless might help people survive this recession shit.

[crzy]

No countrie in the world (even China and USA) can't afford a 100% cashless society,because the implementation would be very expensive.Cashless society means that everyone needs a mobile device or a personal computer.Paper money are still way more convenient.

Even we grow more in terms of technology, I can’t still imagine this world without cash because its really convenient to have cash on your wallet. Governmern will not support this cashless society, cryptocurrency is just here to make faster transactions around the world and we should be happy for this kind of technology.