China is rapidly ditching the centuries-old habit of paying its bills with trunkloads of cash, and making the shift to virtual forms of payment faster than any other country on earth.
Figures released by the People’s Bank of China show a sharp rise in the popularity of anything other than cash – from debit cards to credit cards to electronic wallet mobile apps. China has a staggering 4.2bn bank cards in circulation, enough for every mainlander to have at least three.
Ten times more of them are debit cards than credit cards (3.8bn compared with 391m), but credit card issuance also rose by 19 per cent in 2013, and Euromonitor predicts credit card usage will grow faster than that of other cards over the next five years. Overdue credit card debt – unpaid after six months – also leapt 72 per cent, but this is hardly US-style household debt: China’s overdue credit card debt is a mere 1.37 per cent of total credit outstanding.
The shift away from cash is remarkable for a country which was the first to print paper money a millennium ago: until recently, cash was so popular in China that even large purchases like cars or houses were paid for with bundles of banknotes bearing the portrait of Mao Zedong.
Very low rates of street crime make China, paradoxically, one of the safest countries for carrying around large wads of cash. And decades of deprivation coupled with an only rudimentary social safety net have left older Chinese with an almost pathological fear of debt – and a fondness for holding their wealth in their hands.
But despite all that, MasterCard found in a recent global study that China is making the shift “from cash to cashless” far more rapidly than any other country surveyed, largely as a result of rapid urbanisation and government policies designed to encourage non-cash payments.
And urban, affluent, internet-savvy Chinese consumers are even more wild about plastic. A recent Nielsen survey found that 71 per cent of shoppers in China’s top tier cities said they preferred bank cards over cash, compared with an average of half for other countries surveyed.
Zhang Yujia is at the forefront of the shift from paper to plastic. In fact, she is something of a credit card evangelist, having converted her reluctant parents to the use of a low-limit card that they initially did not want.
And she doesn’t stop at cards: over the recent lunar new year, she used Tencent’s social messaging platform WeChat to send traditional red envelopes full of virtual cash to her friends. Tencent says some 8m people sent Rmb400m ($65m) in electronic “hongbao” over the week-long holiday which ended in mid-February.
Mobile payment apps are surging in popularity as an easy way to pay for smaller items such as taxi rides and movie tickets. When dining with friends who want to “go Dutch”, Ms Zhang pulls out her electronic wallet app from Alibaba’s Alipay to transfer her share of the bill to the friend sitting next to her.
“Paper money stinks”, she says. Jason Chu, a Shanghai academic whose online alias is Big Bachelor, says he only carries Rmb100 with him at any one time: cash can be counterfeit and “carries bacteria and viruses”.
Wu Weiyi of AlixPartners in Shanghai, an advisory firm, says it’s not just about convenience or even the extra cash flow that comes with buying goods now that are only paid for later: companies issue cards to staff to control and monitor their cash flow.
But with many people signing up for cards to get the promotional gifts offered by banks, the number of active cards is much smaller than the total outstanding, he says. And in lower tier cities or among the less affluent, cash is still very popular: “Cash is more cost effective, vendors don’t have to pay fees for it, it can’t be so easily tracked and people use cash to avoid paying taxes.”
The meteoric rise of online retail in China is also a big factor, says Saurabh Sharma of Ogilvy & Mather in Beijing. “Credit card adoption has taken off in the past two to three years primarily due to the explosive growth in online retail,” he says, noting “customers in China buy almost anything online – including fresh vegetables”.
Zhang Yujia’s parents were tough converts to the credo of the credit card: “They weren’t accustomed to the concept of spending your money in the future,” she says.
But now she’s got them buying everything from milk to soy sauce and newspapers with plastic. “They use their credit card as much as I do,” she says. These days, it seems, everyone in China is rapidly being weaned off their wallets.
Additional reporting by Zhang Yan
奥美(Ogilvy & Mather)驻北京的黎明(Saurabh Sharma)表示，在线购物在中国的迅速崛起也是银行卡普及的一大因素：“信用卡普及率在过去两三年内大增，主要原因是在线零售的爆炸式增长。”他指出，“中国消费者在网上几乎什么都买，包括新鲜蔬菜。”