China’s experience with mobile payments highlights the pros and cons of a cashless society

A growing number of people are using mobile devices – their smartphone, smartwatch or tablet – to pay for goods and services. Mobile devices allow people to transact without using cash or a traditional bank card, making shopping faster and easier.

Our recent research on China’s experience with mobile payments even suggests that people who pay with mobile devices are happier than those who don’t.

While China’s experience with mobile payments over the past decade highlights some of the benefits of using digital devices to pay for everyday items, it also illustrates how accessibility issues can leave parts of the community behind.

Although mobile payments have been around since the early 2000s, they didn’t take off until the widespread adoption of smartphones. PayPal has launched its first product for mobile phones in 2006allowing customers to pay others via SMS. M-GIVE was launched soon after in Kenya in 2007. Google launched its digital wallet in 2011 And Apple launched its own version of the digital wallet in 2014.

Over the past two decades, China has become the leader in the use of mobile payment. More … than 87% of Chinese internet users were using mobile payment services in 2021. The high rate of internet usage, a favorable regulatory framework and the will of the government push for a cashless society – with COVID-19 driving the introduction of the digital yuan to replace physical banknotes – all contributed to the success of mobile payments in China.

The major mobile payment platforms Alipay and WeChat Pay, which have more than one billion users each, lead the way. Alipay is a mobile payment app and digital wallet that also allows users to order a taxi, apply for a credit card, and purchase insurance. WeChat Pay is a payment feature integrated into the WeChat instant messaging application. Both apps allow users to leave their physical wallet at home in favor of their smartphone or smartwatch.

But China is not alone in this digital revolution. New Zealanders are also are increasingly adopting mobile payments instead of cash.

More than practical

At first glance, the benefits of mobile payments may seem insignificant: they allow people to shop without the need for cash.

But mobile payments can help cut costs on essentials like food bills. In previous research, we found that mobile payment users in China spent 2,347 yuan (about NZ$546) less on food every year. These savings are due to the fact that people using mobile payments for their purchases were able to take advantage of urgent online promotional offers at checkout.

Learn more:
A cashless society and the five forms of mobile payment that will get us there

Mobile payments have also helped increase farmers’ resilience to adverse weather events allowing them to access money from family and friends outside the affected areas. This access to funds that can then be spent through mobile payments has helped farmers stay solvent after a natural disaster.

Mobile payments can boost rural household consumption making shopping easier for communities that may not have access to traditional financial services such as banks. It has also been found that mobile payments create business opportunities helping small entrepreneurs become more agile, increasing their risk appetite and easing credit constraints by enabling them to take advantage of microcredit services.

And mobile payments can measurably increase a person’s happiness, especially in rural areas.

By analyzing data from the 2017 Chinese General Social Survey and measuring happiness on a five-point scale, we found that the use of mobile payments was associated with a 0.76 point increase in happiness in China. rural. No change in happiness was observed for city dwellers.

The increased happiness was likely due to the convenience of mobile payments, helping people pay seamlessly for a wide range of goods and services.

In terms of gender, the use of mobile payments affects the happiness of women more than that of men, regardless of where they live. In rural China, the use of mobile payments was associated with a 0.83 point increase in female happiness compared to a 0.69 point increase in male happiness.

We found that education increased a person’s likelihood of using mobile payments. And being socially active was also positively associated with mobile payment use. But the data showed that the older the person, the less likely they were to use mobile payments.

Ensure accessibility

While there are clear benefits to the widespread use of mobile payments, one potential stumbling block has been the issue of accessibility. As the global pandemic spread in 2020, concerns were raised that elderly Chinese residents using cash were being excluded by the push to mobile payment options.

Learn more:
Cash and coronavirus: COVID-19 is changing our relationship with money

New Zealand could face similar problems. Concerns have already been raised about the reduction in bank branches in favor of online banking and what this means for older people and those with limited internet access.

While 95% of New Zealanders have access to the internet – either via landlines or on their phones – 31% of people living in social housing and 29% of people with disabilities say having no access.

Given the documented benefits of mobile payments and their growing use, service providers should invest in easy-to-use user interfaces for people from all walks of life. If managed well, the growing popularity of mobile payments in New Zealand could have a positive impact on society, promoting financial inclusion, convenience and well-being.

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