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

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More and more people are using mobile devices – their smartphone, a smartwatch or a tablet – to pay for goods and services. Mobile devices allow people to complete transactions without cash or a traditional bank card, making shopping quicker and easier.

In fact, our recent research into China’s mobile payments experience 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 highlights how accessibility issues can leave sections of society behind.

Although mobile payments have been around since the early 2000s, they only really caught on with the widespread adoption of smartphones. PayPal launched its first mobile phone product in 2006, allowing customers to pay via SMS. M-PESA was launched shortly thereafter 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 emerged as the frontrunner in mobile payment adoption. More than 87% of Chinese internet users used mobile payment services in 2021. High internet usage, a supportive regulatory framework and the government’s push for a cashless society – with COVID-19 kickstarting the launch of the digital yuan to replace physical banknotes – all contributed to the success of mobile payments in China.

Leading mobile payment platforms Alipay and WeChat Pay, each with over a billion users, are leaders. 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 built into the instant messaging app WeChat. Both apps allow users to leave their physical wallet at home and just use their smartphone or smartwatch.

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

More than just convenient

On the surface, the benefits of mobile payments may seem trivial — they enable people to shop without cash.

However, mobile payments can help reduce the cost of essentials like grocery bills. In previous research, we found that mobile payment users in China spend 2,347 yuan (about NZ$546) less on groceries every year. These savings came from the fact that people using mobile payments to make their purchases were able to take advantage of time-sensitive online promotional offers at the checkout.

Mobile payments also helped increase farmers’ resilience to adverse weather events by allowing them to access funds from family and friends outside of affected areas. This access to funds, which could then be spent via mobile payments, allowed farmers to stay solvent after a natural disaster.

Mobile payments can boost consumption by rural households by making shopping easier for communities that may not have access to traditional financial services like banks. It has also been found that mobile payments create business opportunities by helping small entrepreneurs become more flexible, increase risk-taking and relax credit constraints by allowing them to use microcredit services.

And mobile payment can measurably increase people’s satisfaction, especially in rural areas.

Analyzing data from the 2017 Chinese General Social Survey and measuring satisfaction on a five-point scale, we found that using mobile payments was associated with a 0.76-point increase in satisfaction in rural China. No changes in happiness were observed in city dwellers.

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

In terms of gender, mobile payment usage impacted women’s happiness more than men’s, regardless of where they lived. In rural China, the use of mobile payments was associated with a 0.83-point increase in satisfaction for women, compared with a 0.69-point increase in satisfaction for men.

We found that education increases the likelihood that someone will use mobile payments. And social activity was also positively associated with the use of mobile payment. But the data showed that the older the person was, the less able they were to use mobile payments.

ensure availability

While there are clear positives to the widespread use of mobile payments, one of the potential stumbling blocks has been the issue of accessibility. As the global pandemic unfolded in 2020, concerns were raised that China’s elderly cash users would be locked out by the push toward mobile payment options.

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

While 95% of New Zealanders have access to the internet – either via landline or their phone – 31% of people in social housing and 29% of people with disabilities say they have no access.

Considering the documented benefits of mobile payments and their increasing use, service providers should invest in user-friendly 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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