23 October 2018
Low transaction costs and convenience are among the reasons why mobile payments have caught on rapidly in China.  Photo: Twitter
Low transaction costs and convenience are among the reasons why mobile payments have caught on rapidly in China. Photo: Twitter

China’s journey toward a cash-free society

Here is a story from Tao Dong, managing director and senior advisor with Credit Suisse Private Banking Asia Pacific, about his experiences during recent trips to China.

When Tao was waiting at the Zhengzhou airport one day to catch a flight, he felt hungry, prompting him to go to an airport eatery for a bowl of noodles. But he found that he couldn’t buy the meal because the noodle shop refused to accept cash payment, Tao said in a recent media interview.

In another incident, Tao was in Hangzhou, browsing around in a wet market. When he wanted to grab some fruits from a stall, again the vendor refused to accept banknotes.

Recounting these experiences, Tao said he was amazed at how quickly China appeared to be heading toward a cash-free society.

Hangzhou, capital of the eastern Zheijiang province and home to the headquarters of e-commerce giant Alibaba, is recognized by some observers as the world’s most cash-free city.

One of my Hong Kong friends who relocated to the Chinese city says he used to withdraw 2,000 yuan after salary day each month to pay for daily expenses.

But lately he has been finding that the cash in his wallet sits there for many days. That is because he can settle almost all bills — be it for taxi rides, meals, shopping, grocery, rent or utility charges — with Alipay, Alibaba’s mobile payment platform. 

Alipay, launched in 2004, now has more than 500 million users in China.

Mobile payment is becoming hugely popular as it offers benefits to both merchants and consumers.

Consumers don’t need to carry cash and loose change, and payment can be completed in a just a few seconds.

Also, let’s bear in mind that 100-yuan-bill is the biggest bank note in China. If one needs to carry more than a thousand yuan on a person, the wallets can get quite bulky. Another incentive for opting for e-cash is that shops often offer extra discounts for customers who settle payments with mobile payments.

Meanwhile, Alipay helps sellers to improve efficiency and prevent risks of counterfeit banknotes. Also, the merchants won’t need to deposit large amounts of cash from sales into bank on a daily basis.

Using electronic coupons and loyalty cards along with mobile payment service enables them to build customer loyalty.

More importantly, Alipay only levies a 0.35 percent fee on sellers, far below the charges of credit cards or most other payment systems.

A large number of Alipay users put their idle capital in Alibaba’s money market fund arm Yuebao so that they can earn interest income when not using the money and also enjoy the flexibility of withdrawing for payment anytime.

Alipay has launched a number of consumer loan products to further monetize the operation.

The sheer size of electronic payment market is so tempting that rivals like Tencent’s WeChat and’s JD Pay are vying with Alipay for a bigger share of the pie.

– Contact us at [email protected] 


Hong Kong Economic Journal columnist

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