With the increasing usage of digital payments across the world, fiat currency is slowly becoming obsolete. Digital payments have brought about huge convenience as everything can almost be done with a card or a mobile device. China, one of the pioneers in promoting cashless payments through Alibaba’s Alipay and Tencent’s WeChat Pay. The country is slowly phasing out the use of fiat currency, and it is forecasted that around 60 percent of China’s 1.3 billion population will have made a purchase via mobile payment by 2023. With the prevalence and advancement of the cashless payments, China may soon become a cashless economy, where digital payment methods totally replace cash. They currently have measures that are breakthrough for the cashless payment industry.
Use of AI facial recognition
While the most common cashless payments include credit cards and QR codes, China has taken digital payment to the next level through the use of AI facial recognition. Shoppers in China are increasingly purchasing goods with just a turn of their heads as the country embraces facial payment technology. Customers can make a purchase simply by standing in front of the cashiering machines equipped with cameras, if they had linked their their face to a digital payment system or bank account. For example, in a bakery shop Weiduomei, a specialised touchscreen device, similar to the size of an Ipad mini is placed at the checkout counter of the bakery. This device has access to the facial-information database of the parent company. So, if the company has a record of the user’s picture, they will be in its facial-information database, and the machine will allow the customer to pay based on facial recognition. The cashier enters the amount of money for the order, which is then shown on the device screen. The user then taps Pay with Face Recognition on the screen of the device. The device scans the face and recognizes the user. The user then taps Confirm Payment and is done.
Inequalities with cashless payments
While digital payments can only be done with access to mobile devices and networks, it has also left behind people who lack the access or technical knowledge in China’s largely cashless and online economy. For example, in northern China, an elderly man could not board the bus as he could not display a health code app that was required due to the covid 19 situation. Similarly, in Hubei province, an elderly woman, who had little knowledge on online payments was unable to pay for her health insurance with cash. These stories created attention and help to prompt the China government to provide more access and alternatives for the marginalised groups. The State Council, China’s cabinet, then mandated local businesses and government authorities to accept cash payments and provided alternatives for health codes apps so seniors could better navigate the digital divide. The local bank has also started digital yuan programs through lottery-style giveaways by partnering with the local provinces.
Is it possible for china to entirely transit into a cashless society?
While most transactions in China are online, there is still a significant population in the rural areas that prefer cash due to lack of access and knowledge. While some individuals prefer using debit and credit to cash for convenience, businesses benefit from processing fees when consumers use their apps and services to send and receive payments. Handling cash is also expensive, use of cashless payments will help business reduce cost and manage transactions better. China would probably see a transformation in the next few decades as its digital payments have been spearheaded by the current millennials and the younger generation. They have adopted these technologies since young and it has been a huge part of their lives.
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In my opinion, the majority of the world is already partly digitalized the payment process – there are less and less people who use cash. There are even plenty memes on social media platforms that “if you paid by cash it doesn’t count as if you spent money”. It will take a bit of time to fully refuse from cash, more because of older people who don’t like the idea of cards overall (due to the lack of trust to technologies). On the other hand, I don’t understand the idea of paying by facial recognition system – I would feel uncomfy doing that (maybe just because I’m not used to it:)) and there are a lot of drawbacks of using this technology for such an important thing as spending money (especially big amounts)
I think that digital payments are incredibly convenient, but I’m also worried about the impact they could have on society. I think that China is leading the way in terms of cashless payments, but I worry that there will be a lot of inequality if digital payments become the only option.