A customer pays for vegetables with his mobile phone at a stall in Qingdao, China. Mobile payments are rapidly replacing cash in China.
STR AFP/Getty Images
By Aaron Pressman and Clay Chandler
June 5, 2019

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Greetings from Hong Kong. Clay Chandler here, filling in for Adam.

I’m just back from a few days in Beijing where I marveled anew at how modern China is a becoming a post-money society.

I don’t mean post-material society; in today’s China, people still care immensely about wealth: who has how much of it, how they got it, how they spend it. But it’s so two-years-ago for anyone to bother with actual money, those little scraps of paper adorned with the portrait of Chairman Mao.

In China’s largest cities these days, one doesn’t sully one’s fingers with actual cash. Whether it’s paying for a latte at Starbucks, a ride cross town with Didi Chuxing (China’s equivalent of Uber), a roast goose feast at Da Dong, or a simple jianbing on Wangfujing Street, one handles transactions via mobile phone using Alipay (the online payment platform of Alibaba Group affiliate Ant Financial), or WeChat Pay (backed by Alibaba rival Tencent Holdings). As Tom Friedman observed on a recent visit, in China even the beggars use QR codes.

That’s an historic shift. Ten years ago, it wasn’t unusual to see newly rich Chinese troop into the Beijing boutiques of luxury brands like Armani, Vuitton and Zegna lugging “man purses” stuffed with 100 renminbi notes.

And it’s not just shopping that’s going cashless. A recent survey by EY, the global financial consultancy, found that consumers in China— along with counterparts in India and the United Kingdom—lead the world in adopting financial technology. EY quizzed more than 27,000 people from 27 countries on their use of “fintech” in five categories: money transfer and payments, budgeting and financial planning, savings and investments, borrowing, and insurance. In China and India, 87% of respondents said they used fintech for such services; in the U.S., usage was just 46%.

My colleague Derek Zhang, who edits our Chinese language sister publication Fortune China, points out that China’s fintech industry itself is in the throes of a dramatic shift. In the industry’s early stages, many Chinese tech companies portrayed themselves as a “disruptors” seeking to “disintermediate” consumers from traditional financial services providers and pushing into services such as lending and asset management.

But regulators began to worry tech firms were putting too much pressure on the income of traditional banks. Last year, after the implosion of a credit bubble in person-to-person lending, Beijing clamped down on tech firms horning into financial services. Partly because of the tighter regulations, venture funding for China’s fintech firms has fallen sharply. CB Insights reports that venture funding for fintech ventures in China in the first quarter of this year plunged to $192 million, an 89% decline from the previous quarter.

The next wave of startups has a different approach. These upcoming fintech players are positioning themselves as partners to banks, not rivals, The South China Morning Post reports. But at least they won’t have to deal with cash.

Clay Chandler


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