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Cashless China


Cashless China

Alex File

Web Giants, Mobile Wallets and Cash Obsolescence

A Look at WeChat Pay

The first recorded use of paper currency can be dated back to the 7th Century, in Tang Dynasty China. The Tang’s block printed sheets of flying cash — aptly named for their capacity to get blown away in the wind— served as a way for merchants to overcome the inconvenience of conducting long-distance trade with heavy coinage, often made from iron, copper, silver or gold. Today, China is leading a new revolution. In a shift away from physical cash, Chinese consumers are adopting mobile wallets at a speed and scale unmatched by that of any other nation.

Whether it’s a hole-in-the-wall fried dumpling shop in Shanghai, or a C-Store in Chongqing, mobile wallets in China’s first- and second-tier cities are as ubiquitous as the phones that they run on, with adoption in rural areas growing rapidly. Just like the merchants of the Tang Dynasty, consumers in modern China are demanding greater convenience and an enhanced customer experience; demonstrating a willingness to experiment with alternative services in the search for solutions that better fit their everchanging and increasingly digital lives. This article will explore this phenomenon: mapping the rise and future of China’s new payment environment, as well as what these changes mean for business and society, in East and West.

 Two customers in a convenience store wait to pay with their mobile wallets: WeChat (right) and Alipay (left).

Two customers in a convenience store wait to pay with their mobile wallets: WeChat (right) and Alipay (left).

In 2016, Tim Cook, CEO of Apple, reportedly told a group of reporters: "We’re going to kill cash. Nobody likes to carry around cash". In China, however, the proliferation of mobile payments had been swift, and the cashless revolution was already firmly underway. In the preceding four years, mobile wallets had established themselves as China’s most preferred payment method (48%), with cash trailing a not-so-close second (24%). In 2016, 98.3% of urban Chinese consumers were using mobile payment platforms regularly and 25.71 billion transactions drove China’s total consumer spending via smartphones to $7.5 trillion— a sum greater than the GDP of Japan.

With 502 million unique mobile payment users, an estimated market value of 28.5 trillion yuan in 2018, and a forecasted compound annual growth rate of 33%, China’s mobile payments market is disrupting traditional finance and changing the way shoppers engage with merchants, across online and offline worlds.


From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China.

— Richard Lim, quoted by Paul Mozur

Certainly, outside of China the state of mobile wallet adoption has not been as enthusiastic. In the US, for example, despite considerable activity and new offerings in the mobile payment market— such as Google Wallet, Apple Pay, Paypal and Venmo— mobile payments represented just 2% of consumer spending in 2015. In the UK, Mintel reports that 12% of smartphone users have signed up to some form of mobile wallet, with just 7% of those having actually used the service. Indeed, even in the wider APAC region cash still dominates consumer preferences and real-world spending. On this account, the expeditious domination of mobile wallets over traditional payment methods remains— for the time being— a uniquely Chinese phenomenon, with major players emerging from China’s equally unique political, economic, social and technological environment.

A leader in this newly emergent mobile China is WeChat (or Weixin within China’s boundaries). Since its beginnings as Tencent’s social messaging app, WeChat has established an extensive ecosystem of digital services; becoming a lifestyle engagement platform which covers every aspect of daily life. Within WeChat, users can not only chat, but also send money to each other, book a taxi, borrow a bike, order a takeaway, pay utility bills and more. Key to the ability for WeChat to integrate a diverse array of services into a comprehensive ecosystem was the introduction in 2013 of WeChat Pay, a mobile wallet that links users’ bank cards to the app.


Today, WeChat might be best described as a payment app with a messaging function.

As smartphone penetration rose sharply in 2012, and shopping through mobile devices came to characterise China’s e-commerce landscape, Tencent was in more people’s pockets than their rival Alibaba’s digital wallet, Alipay, which had been launched in 2008. With 800 million subscribers over their two main platforms, QQ and WeChat, Tencent’s dominance of China’s mobile and social spheres allowed WeChat to pave the way for a revolution in e-commerce and financial services— eroding half of Alipay’s share of the mobile payments market in just three years. Establishing partnerships with a diverse range of service providers, integrating sub-apps and innovative tools for consumers and business, WeChat’s ecosystem is quickly becoming a one-stop lifestyle app; an operating system within an operating system, meaning users rarely have a need to leave the WeChat platform.


If the internet means mobile, then WeChat is the de facto mobile platform.

The pervasiveness of WeChat Pay in everyday life, particularly amongst digital natives, is pronounced. The speed and ease of WeChat Pay has led to 45% of WeChat users no longer carrying cash with them at all; dematerialising the need for physical wallets and purses, and providing a glimpse into the cashless future that Tim Cook envisaged in 2016. Indeed, inspiration for this article came from my own lack of interaction with cash. Living in Guangzhou, I went over two months without carrying, touching, or using a note or a coin. My stretch without carrying cash only ended on a visit to Shanghai, where the metro ticket machines drove me to having to withdraw cash from an ATM— the first time I’d physically used my UnionPay card since opening my account and an experience which had begun to feel surprisingly antiquated.

 Girls gather outside a hole-in-the-wall shop in Shanghai that accepts mobile payments.

Girls gather outside a hole-in-the-wall shop in Shanghai that accepts mobile payments.

The technological uniqueness of China compared with the rest of the world, and the disparity between its cities, provinces and prefectures— even between its first-tier cities, such as Shanghai and Guangzhou— has played a large role in WeChat’s success and China’s mobile payment revolution. In China’s strictly regulated banking environment, telecommunication and digital media companies, such as Tencent and Alibaba, have stepped in to fill the role as providers of basic financial services, where traditional banks have struggled to offer a suitable proposition.

Unlike many external markets, the lack of legacy infrastructure in China presented an opportunity for technology firms to build coherent ecosystems, that encompass all touchpoints in the shopper’s journey, and bridge online-offline environments. China’s late-mover advantage has meant that they have entered the digital age without an engrained credit card culture, or a fragmented technological infrastructure in place to support multiple forms of payment, allowing China to leapfrog straight from cash to digital wallets. When also seen within a climate of a burgeoning domestic digital retail marketplace (e.g. Taobao, TMall and, an underdeveloped traditional offline retail infrastructure and the rapid proliferation of cheap smartphones, a perfect storm had developed which allowed WeChat and a new wave of FinTech firms to dominate.

 A mechanic works on a tyre as his customer waits; stickers on the doors advertise that WeChat is accepted.

A mechanic works on a tyre as his customer waits; stickers on the doors advertise that WeChat is accepted.

As a platform that is first and foremost focussed on social engagement, within a market where mobile devices characterise the e-commerce landscape, WeChat has become the go-to platform for customer relationship management and effective social engagement in China. Due to its ability to encompass all touchpoints in the social commerce journey (through gathering immense amounts of intimate user data) brands in China can deliver sophisticated experiences and delight consumers with moments that matter. Outside of China, opposition facing mobile wallets is much greater and the ability to build digital ecosystems that provide comparable levels of engagement is largely inconceivable.

Compared to other countries, Chinese shoppers are not only more willing to experiment with alternative payment methods, but also more willing to share intimate personal data and store payment information on their phones. WeChat’s inability to successfully expand beyond the Middle Kingdom highlights the vastly different political and cultural expectations that external markets place upon the organisations that play an intimate role in consumer life. The incredible amount of data that Chinese consumers are willing to entrust to the handful of companies that control every aspect of their social life, such as Tencent, has shown that consumers in China have broadly decided to opt for convenience over privacy.


It has become a default setting for me now to assume that we have no privacy in the face of Alibaba and Tencent.

— Li Luyao, a college student in Beijing. Quoted by Paul Mozur

Under the Chinese government’s policy to bring all online activities under its domain, WeChat’s new privacy policy—which users must accept in order to continue using the app— states that it can make all private user data available to the government. Mobile payments is primarily a data business and in a world where big data meets big brother the all-encompassing scope of Tencent and Alibaba’s data collection networks appears to be staged to play a leading role in China’s planned ‘Social Credit System’; a mandatory system wherein all citizens’ daily activities will be constantly monitored and evaluated:


Beijing has said it will introduce in 2020 its own social credit system that is expected to give and take away privileges based on spending habits, online and real-world behavior, and social relationships. Foreign travel, speedy internet, school access, and social benefits could all be granted or denied based on a person’s score. The government system will most likely be at least partly dependent on data collected by companies like Alibaba and Tencent.

— Rachel Botsman

The opaque and invasive data policies of China’s internet giants, as well as the arguably Orwellian aspirations of China’s government to establish a cyber-authoritarian state, are increasingly drawing attention and scrutiny, both from within and outside of China. In the USA, consumers shy away from mobile wallets as they do not trust the service providers enough with regard to the security of their personal data; they particularly do not trust social media companies. Despite similar discomfort arising amongst the population and business leaders within China regarding data privacy, the social power, embeddedness and ubiquity of Tencent and Alibaba mean that leaving the services is difficult and often impossible for Chinese citizens: bringing a form of social and technological contract into being.

Beyond increasing concerns regarding privacy, many other factors have restrained WeChat from replicating their home success abroad. Principally, it is network effects that drive the adoption of chat apps; if your friends use a particular chat client, then you are more likely to use this client to communicate with them. As WeChat was a late-entrant to external markets, there were already dominant chat apps that had achieved critical mass within these nations’ social networks.

Additionally, the ecosystem that so effectively supports WeChat Pay within China’s borders is fairly non-existent elsewhere. Merchants do not widely accept WeChat Pay, credit card culture is deeply engrained, and the lifestyle services that so seamlessly integrate within the WeChat platform in China— such as Didi, Eleme, Dianping and Mobike— do not have a significant international presence. These limitations and restrictions imposed on Chinese internet services made WeChat’s proposition in new markets weaker than incumbent offerings.

To overcome these roadblocks, WeChat changed its expansion tactics; investing in start-ups, such as Kik messenger— dubbed WeChat of the West — instead of pushing their own brand overseas.


By the time WeChat was launched internationally, there was already a dominant chat app in most markets. It varied from place to place. In Indonesia, it was Blackberry Messenger. In the US, it was WhatsApp. But the core problem was the same: people’s friends were already using a chat app that wasn’t WeChat.

— Charlie Custer

Furthermore, outside of China, consumer needs continue to be well serviced by traditional banking institutions; with mobile banking apps, contactless and NFC payment options leaving no gap in the market for independent digital wallets to fill, and consumers significantly viewing digital wallets as just another thing to manage.

Despite all the above, WeChat Pay has already come to the UK shores. But instead of encouraging adoption by British consumers, WeChat and Alibaba are looking to better serve Chinese outbound tourists and facilitate their spending in the UK— estimated to be worth £1 billion by 2020. Since November 2017, Chinese tourists have been able to pay using WeChat in select stores in Camden Market, with rapid service expansion planned; “During the next four months, SafeCharge will offer over 1,000 Camden Market vendors with a software update that enables in-store payment terminals to generate QR codes and perform WeChat Pay transactions”.

A primary enabler of WeChat’s ability to expand in such a way— especially amongst smaller vendors— is the cost-effectiveness of the QR codes that facilitate the exchange. Widely perceived outside of China as simply a short-lived bridge technology, rather than a payment platform with staying power, QR codes can be simply integrated into existing point-of-sale systems. Mobile wallets proliferated in China so rapidly partly by allowing small vendors to utilise a simple printout of a QR code, instead of having to invest in expensive infrastructure, such as a card reader.

How this small-scale experiment in the UK may develop is uncertain. However, it may present a testing ground from which mobile wallet providers (whether independent or incumbent financial instititions) can learn to build trust and more compelling propositions for UK shoppers, based on more robust customer engagement platforms, and validate new business models from which China’s tech giants can successfully expand into global markets.

China is leading the world in their move away from cash; as mobile wallet providers, such as WeChat, demonstrate new ways for brands and financial institutions to engage with consumers. Nonetheless, the phenomenal rise of mobile payments remains a uniquely Chinese affair. At the start of the decade, a perfect storm emerged that catapulted China’s technology firms into a role as providers of basic financial services to an underserved and increasingly mobile population. As facilitators of almost all aspects of consumers lives, China’s internet giants have established digital ecosystems that provide unbridled convenience, but at the cost of an amount of privacy viewed too objectionable by consumers in the West.

All images belong to Alex File: Instagram @lexanderfile