Looking to China: What it means to be a cashless society
Over the 600s to 900s, China became the first society to use paper bills, 500 years before their European counterparts. Flash forward to 2018 and once again, China is at the forefront of another cultural and monetary revolution – finding themselves as the north star in an emerging cashless world.
In less than 5 years, urban China has undergone a massive growth of digital payments, backed by millennials and competing tech giants. While the West has Apple Pay, PayPal, and other similar apps, China is years ahead with mobile payment processing.
A surprising 85 percent of all consumer transactions in the Western world are still done in cash. How did China adopt cashlessness with such vigour and speed? What is the consequence of this rapid digital transformation, and what can the rest of the world learn from their example?
In 2016, Chinese consumers spent $9 trillion (USD) in mobile payments, while the US spent $112 billion. No one would have predicted China would spearhead a cashless revolution when Alibaba launched Alipay in 2004. The company introduced the platform to expedite user transactions on Taobao (Alibaba’s B2B, B2C, C2C e-commerce platform).
By 2013, Alibaba’s competitor, Tencent, incorporated online and cashless in-store transactions onto its WeChat app, previously used solely for messaging. Coupled with the rise of inexpensive Chinese-branded smartphones, the competing companies have become the two universal mobile payment platforms in China.
Millennials as the driving force
In 2027, it is predicted that China will reach the highest youth population in North Asia. China’s millennials are adopting a cash-free lifestyle, using Alipay and WeChat to pay everything from utility and government bills to wedding gifts. With over 74% of millennials in China interested in emerging technologies, this market is more receptive to digital transformation and view it as an opportunity for innovation and greater convenience.
Producing omnichannel platforms, Alibaba and its sister company, Ant Financial, have created a system of apps that cater to a young and tech-hungry consumer base. Alibaba has adopted live-streaming into their online shopping experience on Taobao. Millennial consumers are now interacting with merchants and brands in a live and unfiltered way. Customer feedback and questions generate instant answers and responses.
China’s tech giants have embedded themselves into the fabric of Chinese society by creating an ecosystem of interlocking apps. Together, these leading players have taken over most e-transactions of clothing, food, entertainment, and everyday necessities. As more millennials opt into this system, a domino effect is created through extensive social network integration, magnifying the influence of these fintech companies.
The rural, elderly, and poor
With urban millennials influencing China’s cashless revolution, what does that mean for members of the rural, lower, and elderly class? If urban street vendors and small restaurants are embracing mobile payments, can these individuals also welcome this digital transformation?
Because of China’s large population, businesses cannot ignore certain demographics of society. Neglecting even a small percentage of a 1.4-billion population could have major repercussions for the country’s overall economic development. As a response, Alipay and WeChat both conduct cashless campaigns, promoting to specific targets. Alipay inspired younger generations to introduce the app to their elders, tying in filial piety within the message. The company sent out a tutorial on mobile payments through a sincere letter to parents, mirroring the language of a child.
The China model
Is China a unique case? China’s speed in which they adopted mobile payments is unprecedented, but the rest of the world is not far behind.
The West is increasingly welcoming tap-and-go payment methods through individual store and credit card apps. Like the Chinese, they are integrating omnichannel strategies to interact with consumers, using a wide array of communication tools. Nowadays, consumers can’t abandon the contents of a digital shopping cart without encountering the same items on a different social platform.
What makes the Chinese model so unique is the fact that there are only two leaders that are running the entire game. With 1 billion users relying on their ecosystems of apps, Alibaba and Tencent have successfully transcended from omnichannel to omnipresent.
The reality is the digital marketplace is ever-changing and unpredictable. No one expected China to catch up to Silicon Valley. Today’s tech Davids might be the Goliaths of tomorrow.