As mobile payments gain ground at an accelerated rate in China, accounting for 70% transactions, paying with cash is becoming a challenge. A growing number of retailers have started to refuse cash payments, a problem that could threaten the country’s economic instability. Indeed, as the country goes through a major economic transformation, the Chinese government needs as many spenders as possible. Yet, a mismanaged shift to mobile payments could exclude many echelons of society, particularly the elderly and the poor.
Today’s burning question is whether mobile payments, mainly through WeChat and Alipay platforms, can legally substitute the national currency? At present, such policy would contradict the Renminbi Management Regulations, the law defining that “Renminbi shall be used for repaying all public or private debts according to its face value within the territory of the People’s Republic of China and not be whatsoever rejected by any organization or individual.”
Meanwhile, according to the World Bank Global Findex database on financial inclusion, approximately 200 million rural Chinese citizens remain unbanked or outside of the formal financial system. Consequently, their access to mobile payments is limited or nonexistent the lack of bank account. Moreover, Consultative Group to Assist the Poor indicated that only 11% of rural Chinese citizens have tried the mobile financial services. Ultimately, to become a default form of payment, mobile platforms will face the challenge of including unbanked citizens into financial system.
Alibaba is already investing in e-commerce service centers in rural China since 2015 to help citizens without the e-commerce hardware or know-how conduct business transactions online. Tencent, in turn, relies on WeChat to connect migrant workers with their families from rural areas. Despite those initiatives, big players have little to lose from excluding the rural and unbanked populations, if not potential new customers. On the contrary, the People’s Bank of China does: lower spending and currency circulation negatively affect the economic data of different provinces and are then reflected on country’s general economic health.