When I first moved to China nearly 4 years ago, I paid for most things using cash. Coming from the US where most of my purchases were made with a debit card, this was a real adjustment for me.
The term “cash is king” couldn’t have been more real when I arrived in China. Transactions were untraceable exchanges and the majority of my friends, both locals and expats, had a few stacks at home just for a rainy day (and still do). To this day, I even have a friend who’s been in China for 5 years and keeps ALL his money in cash, hidden throughout his apartment.
While I didn’t about pull out thousands worth of RMB to hide under my mattress, I quickly came to realize that my newly acquired Chinese debit card would get seldom use. My UnionPay card was simply a means for pulling out cash. Sure, businesses accepted my card when I didn’t have enough xiànjīn (cash) on me, but hardly with a smile.
Back in the US, people hardly carry cash; a few 20s and loose singles, but never “make things happen” money. Unless you’re filming a rap video or work a tip-based service job, most are quick to deposit cash into their checking accounts for safekeeping.
China has been a cash-based society up until the beginning of the last decade. While China’s past generations lived through some very uncertain periods, millennials have grown up during especially prosperous times giving them a more relaxed approach towards spending money.
So what’s this mean?
Those born after 1980 are China’s most educated generation. They have the fastest-growing incomes of any major economy and are earning way more than their elders. Their retail spending is spiking even more rapidly. Partially responsible for this steep transition is short-term consumer credit, with lending consistently growing at 35% each year. Pair this with the advent of mobile payments and these numbers will continue to rise.
If you’re reading this from outside of China, chances are you’re not buying your buddy a beer using your phone. You might Venmo them some cash, but mobile payments haven’t caught on in the west in the way they have in China. Daily mobile transactions are happening 50 times as often in China as they are in the west, making it easier than ever to spend money, even if you forget your wallet at home. Similar to the effect that credit cards had in the west, China’s mobile payment revolution is blurring the psychological and physical barriers created by paying with cash.
Got a few thousand in my WeChat wallet? “This round’s on me”. Left the house with only 100 RMB? “Let’s just get a couple Asahi’s at Lawson”. We’re all guilty of it, but it’s just getting easier with nearly everyone accepting WeChat or Alipay these days.
What the future for mobile payments?
You can pay for everything from taxis to street food and utilities to rent using your phone. Adoption of mobile payment technology has been so rapid and widespread to the point where I’m starting to forget what life’s like without it. Spending the last month in the US visiting family and friends, I quickly realized how much easier WeChat and Alipay have made things for me.
Just the other night a large group of us went out to dinner. When the bill came, we first attempted to split the check and each pay our portion with our cards. This quickly turned into a headache and one person ended up footing the bill while we all paid him back with cash.
We’ve all been in this situation too many times, right? This is one of those inconveniences I completely forgot about since living in China and paying for everything with my phone. Getting a large group together for some hot pot? Easy. Someone grabs the bill (maybe even paying with WeChat or Alipay) and we’ll all send them our split via WeChat or Alipay. No math or “I owe you’s” required.
How easy can it get?
Ease of payment using mobile will only increase spending, both in brick-and-mortar as well as online stores. Mobile payments have even created new channels for spending money. Whether it’s within social media or other online services, consumers are now able to make in-app purchases as well as tip or gift KOLs (key opinion leaders) using mobile pay.
We’ve even reached the point where we don’t even need our phones to pay anymore! With the arrival of Alibaba’s “Smile to Pay”, we’re now able to pay using facial recognition software. The initial rollout of “Smile to Pay” has been slow, as it’s only implemented in K PRO restaurants – a healthy-eating concept restaurant franchise by KFC.
Mobile payment is here to stay
Beijing really backs the mobile payment revolution. Not only does it position China as promoting these innovative industries, it also allows them to record and build a profile around citizens’ habits, movements and lifestyles via spending.
So what’s all this mean for brands in China?
For a brand already in China or looking to enter the Chinese market, there’s quite a bit to take in here.
If you’re a retail store or in the F&B business, you’ve likely already implemented mobile transactions. However, if you’re launching an e-commerce business, a social media account or any sort of app, finding a way to integrate mobile payments to your business model is a must these days. Just like the desktop-to-mobile revolution, the mobile payments will only continue to gain traction and likely eclipse cash transactions.