Learning from China

Our recent visit to Shanghai sprung a lot of surprises and one that stood out the most was the adoption of Cashless payments. The sheer number of places that preferred to accept Alipay or WeChat Pay in lieu of cash was staggering. Having permeated into multiple aspects of life, right from hailing a taxi to shopping at a Brick and Mortar shop, paying for rents, utilities, stores, bike sharing, hotel booking, food ordering etc; all accept either Alipay or wePay. All you need is a mobile phone with a linked bank account and you can pay in almost any store in the country!

Now mobile payments are not a revolutionary technology by any stretch of the imagination. It’s the massive adoption that makes it such a stellar achievement. What started as an out of the box solution to pay employee bonuses for the new year, soon gathered momentum and became a household name for consumer payments.

wePay and Alipay are front runners in the Chinese mobile payments industry with a host of other players competing for market share. Here’s a brief look at a few key industry leaders who are revolutionizing the Chinese mobile cashless payments market.

Mobile payments are not a revolutionary technology by any stretch of the imagination. It’s the massive adoption that makes it such a stellar achievement.


Leading the way is Alipay. As on Q4 2016, Alipay has the largest market share amongst all the major Payment Service Providers at 43.2% while eclipsing the mobile payments sector at 56% compared to their nearest competitor, WeChat Pay. You can buy gold, funds and other financial instruments on Alipay. But what truly separates Alipay from the rest is their foray into markets beyond China. Alipay is now accepted at select merchants in South Korea, Finland, Singapore, Switzerland, Thailand, Israel and more.

WeChat Pay

The second most popular mobile payments service and the closest competitor to Alipay. What started off as a social messaging platform by Tencent Technologies, eventually grew into a payments company. Imagine them as a chat messaging service similar to Whatsapp but with integrated payments. Over the years, WeChat Pay evolved from a P2P payment method into a national payments service provider. Even though WeChat Pay has a lower market share compared to Alipay, there is a huge scope for adoption since about 50% of WeChat user base are yet to use WeChat Pay.

Lian Lian, PayEase, Yeepay

With a combined market share of 5%, Lian Lian, PayEase and Yeepay have some interesting product offerings with the likes of investment options and one-click payments. They have an existing partnership with China UnionPay for Banking services. However, what’s capturing everyone’s attention is their partnership with Apple Pay, who have had a rough few years trying to gain foothold in the Chinese market. This partnership with Lian Lian, PayEase and Yeepay sees Apple Pay foray into the Digital Payments sector. It’s easy to see why Apple wants a slice of the digital payments pie in China. Now that it has a strong foot hold, they can now look forward to leveraging their brand.


Mobile payment methods amounted for $5 trillion in 2016, according to Analysis data cited by Hillhouse Capital. With almost every business accepting mobile payments, there is a general fear of missing out on the digital payments ride. The average consumer in China expect every store to have a mobile payment option and hence would be unwise for Businesses to not adopt these technologies. The technology is being made affordable and is so wide-spread, that there is a significantly high adoption rate even in the poorer section of society. This in itself is an interesting case study of how countries aiming to go cashless can plan for financial inclusion, one of the elements (discussed in our earlier article) hindering societies to go cashless.

According to CLSA, a research investment company based in Hong Kong, electronic payments would amount to in $45 trillion by 2021. Such a massive surge in alternative payment methods has called for the People’s Bank of China (PBC), the country’s central bank, to issue a new rule requiring that all payments made through third-party platforms like Alipay and WeChat Pay would need to pass through a new, independent clearing house starting in June 2018.

China’s adoption of mobile payments serves as a great template for other societies aiming to go cashless.


Are card payments taking over Cash?

Looking at the growing number of point of sale (POS) operations by Payment Service Providers (PSP), there has been a gradual shift towards widespread use of card payments in lieu of cash. Comparing the statistics to North America, China and developing countries like India, the rate of adoption is comparatively lower, mostly attributed to high transaction fees. Despite the emergence of digital payment methods, adoption of card based payments by PSP’s are still on the rise.

The infographic below highlights current trends in Card payments in the EU. Data for this infographic is sourced from European Central Bank, Statistical Data Warehouse.

Card Payments
Card Payments Infographic

The average value per card payment has increased to €48.9 which shows a relatively high degree of confidence in the payment method. This along with a 9% increase in the number of cards issued shows a gradual improvement in uptake.

This has naturally translated in an increase in the number of POS payments by 9.5% from 2015. With a higher number of cards circulating in the market, the value of POS payments by cards has amounted to €2294.2 Billion.

Another interesting aspect is the 2.5% reduction in ATM terminals over the last 3 years which has led to a 1.8% decrease in cash withdrawal in ATM’s provided by PSP’s. With the emergence of digital payments, there is a possibility that this reduction in ATM’s could be attributed to the higher cost of operations, thus scoring low on cost-benefit.

In summation, the uptake of card payments has gradually increased over the past 5 years with a comparatively slower adoption of cash. This along with positive sentiment regarding digital payment methods, could signal the marginalization of cash use in a decades time

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Cashless Society: Fear, Uncertainty, Doubts

Here at cashless payments journal, we will always advocate cashless societies. However it would be unwise to not acknowledge the implications of going down this route. The socio economic hurdles arising from this transition cannot be ignored. In this article, we explore some of the hurdles that present itself in the journey to going cashless.

Financial Inclusion

One of the biggest challenge is the issue of financial inclusion. A cashless society would hit the unbanked poor and homeless the hardest. Without access to payment tokens, the poor would find it increasingly difficult to meet daily necessities. Frankly, there needs to be dialog at state level to be able to scale up to these objectives. This would involve subsidizing payment methods and having infrastructure in place to register everyone. And this transition cannot happen unless the poor are provided easy access to banking services, which is a problem that has been left unsolved for decades! However, if this can be achieved, then it could potentially be the best way to ensure the poor get social benefits paid directly into their account, without money getting siphoned into the hands of corrupt officials.

Issue of Ownership

One of the most common arguments against going cashless is the loss of control. By signing on to a cashless payments providers and by signing on to their elaborate terms and conditions, consumers are potentially at the mercy of Institutions and Governments. Risk averse consumers paranoid over transaction, holding and interest fees, tend to prefer cash. This is where the anonymity of cryptocurrency shines! A decentralized yet public ledger is ideal for consumers worried about the issue of ownership. Sure, there are mining and transaction fees, but it is the lesser of all evils. Coins such as Monero have a strong use case by providing anonymity, low transaction fees and decentralization.


Any digital asset that is held online is always at risk of being under attack. Cyber attacks targeting vulnerabilities in the system happen far too often. The less informed fall prey to social engineering methods such as phishing, while Enterprise Businesses fall victim to DDoS attacks. Where there is digital, there is always a weakness that is left to be exploited. Even cryptocurrency is not immune to attacks given the latest news surrounding the hack of Japanese exchange Coincheck. The issue of security is one that will never go away.

Marginalization of society

Industries that are heavily dependent on cash would get marginalized. One recent example of this occurring was in India. The government attempted to demonetize cash in a bid to eradicate black money. This led to a surge in cashless payments companies such as PayTm. However, minimum wage workers and laborers were the ones who felt the biggest impact. According to this report from Forbes, the suicide rates among laborers and farmers started rising during the first few months of demonetization. Employees in industries such as construction, mining, factory etc where payment is offered in cash, got marginalized the most. Thus it would seem, developing economies would suffer the most, if their hands were forced into going cashless.

With the current state of technology, cashless is definitely seen as a financial instrument for developed countries. Given the socio-economic conditions that exist, the current hybrid mix of cash and cashless payments would continue, until smartphone technology and cashless infrastructure becomes economically viable or subsidized by the government.