China: A Cashless Society?
Alipay plans to make China a cashless country within five years
Cash is no longer necessary in China. At the 2017 annual meetings of the Chinese Communist Party (两会; LiangHui, Two Sessions*), the construction of a cashless society was discussed among the National Committee members who have taken an interest in actively promoting this goal.
*LiangHui: In March every year, there are two national political events in Beijing, the Chinese capital. One is the National People’s Congress, which is a gathering of the nation’s top politically influential organizations, and the other is the Chinese People’s Political Consultative Conference, during which a policy advisory body. During this period, China’s goals for growth and directions in which the government will pursue reform are announced. Their most important feature is that these declarations are linked to concrete actions as the government consults with the main stakeholders in each affected industry before making the declarations rather than just making a one-time announcement based on political whim.
For the industrial sector, the two sessions is where the action plans for China’s economy are declared. This means that the sessions make declarations on the issues that have already been discussed between the Chinese government and industry giants. This is the same context in which the concept of the cashless society was mentioned.
According to the Baidu Baike (百度百科), a cashless society is one in which cash transactions are replaced by mobile payments as the mainstream payment method. This definition does not mean that cash has completely disappeared, just that payments are no longer limited to just cash.
In other words, in a cashless society, people will be able to engage in commercial activities in the same way through their smartphones regardless of whether they are engaging online or offline.
On April 18, AntFinancial Group(蚂蚁金服), the company behind Alipay, announced that it plans to invest at least 3 billion yuan in a ‘Cashless Alliance (无现金联盟)’ with 15 other companies.
“The main goal of the cashless alliance is to build a low-carbon economy and increase business efficiency. The cashless alliance expects to realize a cashless society throughout China within five years and aims to form more than 30 million alliance members and more than 100 alliance countries. According to the cashless alliance’s explanations, sharing of services such as payments, data, and credit evaluation allows each store to increase efficiency by more than 60%, lowering costs and improving business efficiency.” — 无现金联盟成立 支付宝60亿推进无现金社会
The current members of the cashless alliance are Carrefour China(家乐福中国), Beijing Shoudu Airport (首都机场), Huaqiang Electronics World (华强电子世界), Ofo(小黄车; a Chinese shared bicycle service), Guangzhou Adult & Child Medical Center (广州妇女儿童医疗中心), Liangpinpuzi (良品铺子), Shanghai Rawson (上海罗森, a convenience store chain), Zhejiang Xinhua Bookstore (浙江省新华书店), YangminshuangmenjiFood, ePassi (Finnish mobile payment service), Paybang (Australian mobile payment service), Koubei(口碑) and Eleme(饿了么).
In addition, AntFinancial Group announced the slogan “a cashless society in 1698 days” through the official Weibo, China №1 Social Media on July 6 and planned an event to give hongbao(红包; red envelope) to users who suggest ways to create a cashless society. It held cashless city week events in Hangzhou, Wuhan, Fuzhou, Tianjin, and Guiyang in August of this year. In cooperation with each city’s government, it expects to encourage consumers to make non-cash transactions via mobile payments at over 90% of the stores in each city.
China’s cashless society is moving beyond just blueprints through cooperation between government and industry and it is happening quickly. Biometrics and offline digitization are at the core of this movement.
▍Alipay: Biometric Payments beyond Just Mobile Payments
The main Chinese mobile payment services are Alibaba’s Alipay and Tencent’s WeChatPay. Together, the services account for 90% of the market. There are many other payment services sponsored by public or large corporations, such as Unionpay, Jingdong, Xiaomi, and so on, which make up the remaining 10%.
These services have mainly been using QR codes or barcodes to conduct transaction. However, this is only the beginning. Industry and the research institutes are predicting that further research will lead to a cashless society built on biometric payments.
Computing visualization technology will back up as shown in the graph above. Alibaba has been preparing for this since 2015 through its Kung Fu Project.
“Alipay started as a payment service, but now it is leaping as a lifestyle platform that combines finance, big data, and technology. We recently developed ‘VR Pay,’ an iris-recognition payment service, following the face recognition payment function,” said Douglas Feagin, Global President at AntFinancial Group, in an interview with JoongAng Ilbo while visiting Korea in 2016.
Even biometric payment systems, which were considered to be a surprise development in 2015, have now been commercialized through the acquisition of Alibaba’s related technology company and technology development.
“According to IT Zhijia (IT之家), a Chinese media company, AliPay’s facial recognition payment function is on the verge of commercialization and it will be seen in the AliPay merchant store soon. If facial recognition payment functions are added, you would still be able to easily make purchases even if you forget to carry your smartphone, or if the smartphone battery is out, or if you do not have enough data. AliPay’s facial recognition is happens in only a second thanks to the Ant Financials’ investments in biometrics technologies, such as iris and fingerprint recognition. AntFinancial Group is a part of Alibaba Group’s financial subsidiary.” — Newspim, Korean Media Company’s Report
▍New Retail (新零售) is promoting a cashless society by digitizing offline shops
Hemaxiansheng (盒马鲜生), Wanda (万达), Riso, Bingo Box (宾果盒子), etc. In the meantime, many brands of smart convenience stores have begun employing QR code payment systems instead of cash payments, which serves as an example of the new retail ecosystem.
One of the features of Hemaxiansheng is that you can buy products using Alipay, whether online or offline. Wanda Group, which has the biggest offline department stores in China, and Union Lien (UnionPay), have similar strategies. UnionPay’s NFC payment system can be used exclusively at Wanda’s department stores, hotels, and hospitals.
Riso, of the Bailian Group, which opened on July 2, is a new retail store, too. Riso is established as a a future mart (未来店项目) concept store. Fresh food accounts for 60% of all products. After purchasing fresh food products from the nearby markets, Riso will cook them on-site or sell semi-prepared foods for takeout.
Customers can get food within 60 minutes if they make a purchase with the Riso App, which seeks to create a system that allows for offline food delivery after making an online reservation. Riso App consists of categories such as membership, payments, and marketing .
Bingo Box and BianLiFeng are same for smart convenience stores. Bingo Box is a self-service convenience store with no staff. Product sales data, inventory quantity, and user data is analyzed through the store manager’s admin page and app. Based on this information, the store manager visits the store, checks on its condition, and restocks products at a designated time every day.
In Bianlifeng, located in Zhongguancun, Beijing, customers can purchase and order products using only apps. Each store’s WiFi connection and QR codes indicate where the customer is making a purchase. Customers can directly purchase products by scanning the product’s QR code.
In 2016 and 2017, one of the biggest topics in China was offline digitization, which is based on mobile payment systems. However, this change did not simply mean the creation of a convenient payment environment for customers. In China, mobile payment systems became hubs for taking offline commercial ecosystems, built over a decade, online. From online-to-offline to the the offline digitization of new types of retail services, mobile payments covers it all.
The rise of mobile payments means a shift to digitized money. Mobile payments are no longer payments of real cash, but rather are flows of data between buyers and sellers. Right now, everyone’s mobile devices are just means of payment. Biometric payment systems can be created quickly in China because of the established payment infrastructure.
China’s cashless society is no longer a product of imagination. The FinTech companies, like Alipay, have built the foundation so that mobile payments are spreading quickly offline. Even the Chinese government is supporting it politically. Other countries can’t catch up with China.