China is about to cross the threshold to becoming a cashless society. Though cash still exists, many Chinese today never touch paper bills or plastic debit or credit cards at all in their day to day life. Increasingly now, financial transactions in the Chinese economy are taking place through payment apps on smart phones. Watch special report below:
Imagine a leaving your house in China and hailing a taxi that you pay for by scanning a QR code on an app, buying food from a street vender again with a phone app, since no cash is accepted, then later going out for lunch by renting a bike just by scanning its QR code.
At the restaurant, just input the price of the meal into the app to pay again. On the way home, you may feel charitable, so you give money to a street beggar performing a song for money, again within the app, before stopping at a Buddhist temple where you can increase your karma by donating with the app.
The two most popular payment apps are WeChat Pay and AliPay. WeChat Pay is linked to the WeChat social network, a sort of Facebook on steroids that now connects nearly all Chinese in a network of social profiles, chat, shopping, payment, music, videos and a dozen other functions.
AliPay, an app created by Alibaba affiliate Ant Financial Services, is the other major player. Alibaba is the world’s largest online shopping company (which dwarfs Amazon in size) and AliPay payments are accepted at tens of thousands of stores across China.
Ant Financial Services is linked to an online money market fund, Yu’E Bao, which encourages users to invest and spend with AliPay. Its 4% interest rates have transformed Yu’E Bao into the world’s largest money market fund now with $217 billion by the end of June (1.43 trillion yuan).
Both payment apps allow Chinese consumers to send peer-to-peer payments directly between bank accounts as well, much like a fully integrated and easy to use version of PayPal.
The Chinese are estimated to have spent $5.5 trillion through mobile payment platforms last year, at least 50 times what those in the US spent, and this continues to accelerate. Estimates are that this will quadruple by 2021 and, by next year alone, reports indicate that there will be as many as 45,000 stores in Japan that accept AliPay, to cater to Chinese tourists. More on Propjecy News Watch