Mobile payment.

Can China really go cashless? Chinadaily.com.cn published a post on July 19 with the title "China Moves Closer to Cashless Society." They have also shared infographics detailing the demographics of "cashless" consumers. Observer.com on July 11 released an article entitled: "China Is One Step Closer to Becoming a Cash-Free Utopia." Npr.org had their say on the subject on June 29 via: "In China, A Cashless Trend Is Taking Hold with Mobile Payments." The Sixth Tone posted on August 08 via WeChat the article: "A Day without Cash: Are Chinese Consumers Ready?" These are but a few examples. The topic has certainly caught the media's attention of late. Which only reflects the overall trend and awareness within the general public. Yet, as with so many other things parroted by news outlets, an individual best do their own research and take time to think things through before jumping on the bandwagon. JIN is not to be left voiceless on the subject, nor shirk the responsibility to provide another angle on the issue of "cashless China."

Yesterday's China

It is hard to imagine but just a few decades ago, our monthly or weekly wages were given to us in envelopes with cash. This practice was then replaced by the issuance of checks, which had to be endorsed and deposited into bank accounts. Speaking of checks, when was the last time any of us remember writing or receiving a check? China seemed to skip the personal check phase. Other than the rich or companies with large transactions, personal checks were never widely used. Instead, China has jumped from cash to cashless.

It's amazing how quickly society is changing and this is one aspect, becoming cashless. The development and use of cell phones and the smartness of these mobile wonders probably spurs on this phenomenon. In China, where most citizens have more than one device, the use of electronic payments is expanding at a rapid rate.

Jack Ma (马云 mǎ yún), founder and Executive Chairman of Alibaba, spoke at the first World Intelligence Conference held in Tianjin at the end of June this year. In his speech, he mentioned that he intends to build Tianjin into a cashless city and the municipal government will sign an agreement with Alibaba's financial affiliate Ant Financial to push forward the building of a "cash-free city" in Tianjin, where electronic payments will be used in areas such as transportation, medical care, education, and social security.

In related news, it was no surprise when it was recently announced that the Hangzhou Airport will be one of China's first cashless airports. From parking, to food outlets and other services at the airport, these vendors will only take electronic payments, preferably Alibaba. After all, Hangzhou is the hometown of Jack Ma and headquarters of Alibaba.

There are many mobile payment options in stores.

Electronic Payments

In China, the top form of electronic payment is WeChat or Weixin (微信 wēixìn), owned by Tencent. For details on exactly how pervasive WeChat is in China, see the article entitled "The WeChat Takeover" published in the 06/2017 edition of JIN. A key stat is that based on the user report shared by China-Channel recently, WeChat has surpassed 889 million users. This makes it the most widely used communication application in China. Since the initial launch, updates have included the release of extensive electronic payment services. After linking a bank account to their WeChat account, users can pay for things online, transfer money to others, and even pay bills. For example, household utilities and even cell phones can be paid using WeChat. Not to mention countless stores around town accept WeChat for purchases.

Alipay, a Jack Ma creation, is a close second. Other popular phone paying apps are Baidu (百度 bǎidù) and QuickPass(银联闪付yín lián shăn fù). To pay electronically, all that is needed is a local Chinese credit card or Chinese bank account. Obtaining a Chinese credit card though for expats may be difficult as banks are worried about tracking a foreigner who can easily leave China and therefore may have a hard time collecting any outstanding debt. Comparatively, a Chinese bank account is easier to obtain. A local phone number along with a form of government issued identification such as a passport are necessary when opening a bank account. Based on various online reports and user feedback, many seem to recommend using ICBC (工商银行 gôngshâng yínháng) for opening a basic checking account. However, The Bank of China (中国银行 zhôngguó yínháng) is most known for its ability to handle foreign currency. Which some expats may find useful if needing to fund their local bank account via converted foreign funds. With a local bank account and ATM card in hand, consumers can access the wonderful world of electronic payments and online shopping such as Taobao 淘宝 (táobǎo) and numerous other online vendors. The key to doing so lies in "linking" the bank card with a digital payment processor, such as Alipay or WeChat.

However, it has reported on extensively, sometimes the process of linking a bank card can be challenging for expats. The problem largely revolves around the requirement in WeChat to enter in one's name exactly as the issuing bank has it recorded in their system. This can be next to impossible to figure out without asking the bank directly. It all hinges on the bank representative's data entry. Namely, every rep represents a unique possibility in how they type an expats name in. It could include issues like not putting spaces between a first and last name. Or reversing the order of the names due to confusion of which should come first. Any of these variances can spell disaster for users trying to link a new bank card in WeChat.

The best solution, may be to get a print out from the bank of how the bank has the expat's name recorded in their system. Ideally, this can be done when the bank account is being opened. Otherwise, that joy of getting a new ATM card could be quickly dashed to pieces upon many unsuccessful attempts to add it to WeChat. Worst case scenario, an expat could go to the bank where their account is, and complete the WeChat 'Add a Card' process onsite. When it gets to the point of entering in a name exactly as the bank has it recorded, ask the teller to confirm the name is entered correctly as per their system records. Show the phone screen to the teller as they check their system. Hopefully it doesn’t get to this point, but at least it's a backup plan. Also, some expats avoid this hassle all together and ask a close Chinese friend if they can link their card. Of course, this creates all sorts of liability and opportunity for misunderstandings between friends, not to mention concerns over spending too much or adding money.

Still, in terms of paying electronically and shopping online, the success in China is incredible. For example, on last year's "Singles Day", November 11th (11/11), Taobao realized over a trillion RMB in sales in 24 hours. Buying online in China is very efficient. It often entails placing an order today and getting the goods delivered the same day or the next. This includes even perishable goods such as food and frozen items. There are countless apps related to buying online. The caveat is, a great majority of these apps will require payment via WeChat or Alipay before being able to complete the transaction. For example these include Jingdong （京东 jīngdōng）, Taobao （淘宝 táobǎo）, Tianmao（天猫 tiānmāo）, Meituan Waimai（美团外卖 měituán wàimài）, Baidu Waimai （百度外卖 bǎidù wàimài）, Shunfeng Youxuan （顺丰优选 shùnfēng yōuxuǎn）, 1 Haodian （1 号店 hàodiàn）, Meiri Youxian （每日优鲜 měirì yōuxiān）, Mobike, and the list goes on and on. Until expats have linked a bank card with WeChat or Alipay, life in China is going to be exponentially harder.

For expats that have successfully linked a form of payment the next challenge will come in funding the account. For locals this usually isn't a big problem because they may get paid via electronic bank transfer. That means, as soon as their paycheck is processed, they have money to spend electronically. Expats however, may face a number of issues. One, they are paid in cash RMB. This means they have to go to an ATM or bank branch to deposit the money before using it digitally. On the surface this may not seem like a big deal, except it is not uncommon to find ATM's that allow withdrawals but not deposits. The second challenge could come for expats that are not working in China, and therefore do not have a steady stream of cash RMB coming in. For them, the process usually include first needing to withdraw or covert currency into RMB. This means, either long waits at the bank and/or complicated conversion processes. For those that can directly withdraw RMB from an ATM using a foreign issued ATM card, other problems can arise. Such as daily withdrawal limits or the overseas bank freezing the ATM card because of suspected fraud due to frequent withdrawals in large amounts. Even if one does get that cash RMB withdrawn, they still need to get it deposited into their local Chinese bank account.

Nonetheless, despite these related challenges, E-shopping has become so effective in China especially for locals that many traditional shopping malls have experienced a serious loss of shoppers and downturn in sales. Some department stores have reverted to establishing their own websites and selling online. The physical store being little more than a means to try things on in person before buying online.

Other Cashless Countries

In India, the government has announced a policy for the country to implement cashless payments to counter corruption. In November of last year, India announced that its most popular paper currency notes would be null and void within 50 days. It was regarded as one of Prime Minister Modi’s attack on corruption and the currency black market. By forcing the use of electronic transactions, all payments would have a record and discourage illegal payments, which were hard to trace because of the absence of a paper trail. The demonetization also helped curb the counterfeit problem with fake bills that was a severe problem in India.

The digital trail associated with electronic payments though does have some concerned in terms of privacy. For example in the article mentioned earlier published on chinadaily.com.cn a Korean student was quoted as saying "I am quite concerned about my privacy." The same student further stated: "I am afraid my personal information might be leaked." Indeed, detailed data trails are excellent tools in terms of potentially discouraging dirty deals. However, it also creates the real possibility of infringement of privacy and even identity theft.

In Sweden, their official website www.sweden.se claims that they are the first cashless society and the majority of Swedes do not carry cash but rely on bank debit cards and credit cards. Even their children carry bank cards. However, the website also state that some merchants complain about the extra transaction charges.

In Canada and the United States, the wave of e-payments is rising but still not fully utilizing the capability of paying by phone like in China. Plastic is still mainstream with many individuals carrying numerous credit or bank cards. In fact the plethora of cards being carried in one's wallet has even been linked to some health issues. Such as back and posture problems related to an excessively thick wallet being placed in a particular back pocket. After swiping or inserting (due to chip readers) that piece of plastic, payments are often made electronically via an online bank for the purchases. A number of people have not grasped the idea of eliminating this middle step and making payments directly with the phone at the point of sale. Personal checks are still in use in some cases, while banks are trying to discourage this by inflicting high charges for printing checks and transaction charges.

A critical clue in understanding the difference in the cashless trend between east and west lies in attitude toward money itself, perhaps even the wider topic of investment. In the west, money is often thought of as a tool which can be leveraged. As in, have money work for you, instead of you working for money. This is achieved via a number of investment products such as stocks, bonds, CD's and the like. For westerners, any opportunity to buy now and pay later has the potential to be a good investment. How so? Take for example another form of cashless payments, a credit card. Instead of buying now and paying now, credit cards allow the client to buy today and pay not just tomorrow, but usually a month later! That means, during those 30 days the cash or money itself can be used for other things. This feature of cashless spending via credit cards is both a risk and reward. For those with self-control, they may leave the money sit in the bank or other form of investment during that period of time. When the "due date" for the credit card rolls around, they use the funds to pay off the amount in full, avoiding any and all interest charges. Add to this that sometimes credit card companies and other financial institutions even offer 0% interest on purchases or transfers for a period of time, the opportunity to earn money on money even after its been spent electronically is available.

The cashless tools popular in China work on entirely different principals. They amount to little more than electronic cash. Money that is spent today, must be possessed and parted with today. Alipay and WeChat in China fundamentally rely on "cash" or liquid funds being in the user's account at the time of purchase. There is typically no element of lending or credit involved. This is a huge difference in the cashless nature of China and lands abroad. Apple Pay is clearly patterned off of western buying habits, as it allows users to link credit cards and not just ATM or debit cards. Even in cases where Alipay or WeChat may allow the linking of a credit card, it should be understood that many Chinese users, and virtually all expats are linking ATM/debit cards and not credit cards. That means, a user must have the funds available at the time of purchase, pretty much making it a "cash" transaction.

The massive problem with all this is that the consumer must immediately part with funds at the time of transaction. For Chinese consumers, this isn't a big deal, at least not mentally. As Chinese consumers have long since accustomed themselves to spending cash, that is, the money they actually have. Expats on the other hand, may have an entirely different spending mentality. Either they don't want to part with their money at the time of transaction even though they have it to spend, because they want to use every day possible to invest that money and get a return on it. Or, they lack the money, and need the month window of time to make the money before paying the amount off when the credit card comes due. Regardless of which it is, expats simply don't like the idea of parting with their money immediately, which is a critical element of paying with Alipay and WeChat at current.

Cashless for 24 Hours

In the past, one might have wondered about going cashless for 24 hours? Nowadays, it is likely not difficult. A recent article was about a young man in India who did not touch a bank note or coin for 50 days last year. Think about life in Tianjin. After waking up and going to that favorite street vendor for the usual breakfast, simply pay by scanning his or her QR Code (quick response code). In fact most street vendors prefer this versus dealing with dirty notes. Plus then having to deposit that cash later by standing in line at a bank which is open only during the daytime, which is when they need to be on the streets doing business.

To get to work, scan a QR Code and ride a shared bike making payment via WeChat. Or take a taxi or private car paying again by using WeChat. Outstanding bills can be paid via online banking. Go and grab lunch at a nearby restaurant and pay by scanning yet another QR Code. Or if sharing a meal and splitting the total, transfer the amount owed via WeChat to the other party.

Going to a movie or shopping after work is no problem either without cash. Even from the comfort of home, if not wanting to bother with cooking or going out to eat, there are several apps related to Waimai (外卖 wàimài) that enable ordering meals online. A nominable delivery fee may apply. Food is usually delivered hot and fast. Payment is made electronically when the order is placed.

Wechat wallet savings.

Cashless Exceptions

Having listed all these options for living cashless, there are a few exceptions. A number being related to a car. Many parking lots still require payment in cash. If one is really stuck and completely cashless, try convincing the lot attendant to take a personal payment to his or her WeChat account. But this will be irritating for them and any delay in the payment process will cause the cars in back to start beeping away to move along. The other alternative would be to convince one of the other drivers in line to provide the needed cash and then digitally transfer the amount to their phone. Talk about losing face and frustrating a lot of people though.

The same holds true at the highway toll stations, of course there are the ETC (Electronic Toll Collection) stations. But they are usually fewer than the cash booths, an indicator that cash is still more commonly used in this situation. An ETC card requires registration and maintaining a balance. Plus for those on an expense account, a receipt for the toll payment is needed in order to get reimbursed.

Some gas stations will not take credit cards or mobile payments, especially those on the out of town highways. Better not chance this by preparing some cash on hand when travelling, or else an ATM run may be necessary.

The other exception that expats need to realize in their cashless China adventure is that many local restaurants will not accept foreign cards, even if it is a Visa or MasterCard. Be sure to carry some spare cash or be ready with a hefty available balance in WeChat. Foreign cards are usually ok at international hotels. But likely it will be refused at small, local venues. Besides this, foreign cards may not be a good idea because it may result in an exchange fee and/or a transaction service charge.

Cashless Conclusion

At the top of the list of countries presently making payments done in a non-cash method are Singapore, Sweden and Canada with about 60% of the transactions made without cash. China is rapidly exceeding the pack and although it was the first country to adopt paper money, it may also be the first country to abandon it.

Michael, a USA senior citizen living in China, indicated that he has finally downloaded WeChat and has 200 RMB in his account but has yet to use it. He says: "It's hard to teach an old dog new tricks, and I still am used to paying for my small purchases by cash." Michael makes a good point, older people will likely be more comfortable carrying cash and paying cash. Some simply find it awkward to use a phone to pay for a quick Jianbing (煎饼jiānbǐng) and would rather toss a 5 RMB bill in the cash pail on the cart, as they've done for ages.

Nathan, a Canadian expat has lived in China for 3 years and frequently travels on his own throughout the country and sometimes to remote areas. He has found that his WeChat and Alibaba accounts are sufficient in most circumstances but still carries about 1-2000 RMB cash just in case. He also states that things have changed a lot since he arrived in 2014 but then so has his Mandarin speaking ability, which probably allows him to communicate and understand the payment options more clearly. Another Canadian expat still slips 100 RMB and 100 USD cash in their wallet's secret compartment for an emergency or as the Chinese call it "救命钱"(jiù mìng qián). Which literally means "save life money". This in itself may prove the point. Cashless living may work in some cases. However, when the powers out and/or there's no internet service, that smartphone gets real dumb real fast. In an instant all the marvel of "modern technology" disappears and cash continues to reign as king.

Many vendors have accpeted mobile payment.