A Cashless Revolution: The Rise of the QR Code in China
The Chinese skipped credit card technology and went straight to mobile payments
What does a taxi, a coke, a pack of cigarettes, food delivery, and a badminton court in China all have in common? Even beggars are equipped with it!
Answer: You can pay them all with a QR Code.
China beats US and other countries when it comes to implementation of digital payments. With more than a billion Chinese people using smartphones to pay for almost everything, all other nations are a distant second when it comes to usage.
What makes this all possible? At the heart of this cashless phenomenon is the QR Code. Originally from Japan, a QR code (short for Quick Response) – acts as a virtual container that holds data for product tracking, documentation, item identification, marketing information, time tracking and more. Think of it as a highly advanced barcode.
In the case of digital payments, it allows the merchant and customer to transact with a simple scan of the code. No need to hand over cash. Not even a swipe from a credit card.
In 2016, Chinese consumers spent $9 Trillion in mobile payments. That’s not a typo. Compare that to the $112 billion worth of mobile payments made in the same year in the US, you’ll realize how small other markets are. In fast-food purchases alone, more than three-thirds of all payments made were through mobile, according to Tencent, maker of the popular messaging app WeChat.
WeChat (CN: 威信, Wēixìn) is the second most popular mobile payment solution in China, trailing rival AliPay by Alibaba. While most of us know WeChat as a messaging platform, Tencent capitalized on WeChat’s massive user base to implement a payment system through the app itself. Just 3 years since the introduction of mobile payments through the messaging app in 2013, it positioned itself as a fierce competitor to Alipay, grabbing as much as 40 percent of the total market for mobile payments.
Alibaba launched AliPay (支付宝, Zhīfùbǎo) back in 2004 as the payment system of their ecommerce marketplace, TaoBao – dubbed as the “Ebay of China”. Almost a decade after, Alibaba incorporated mobile wallet features that allowed users to send money to each other and even split payments using QR codes. Around this time, smartphone adoption in China was booming. And along with this rise in smartphone users was the massive adoption of mobile payments.
Why was it such a hit? One of the main reasons is convenience. AliPay users started linking their bank accounts in order to access their funds and make purchases with a simple tap or scan. Need to get your shoe repaired? Hand it over to the cobbler then scan his QR code using your smartphone to pay.
Want to buy crabs? Take a photo of its QR code and information about it will be shown in your phone, including prices and where it came from. Inside Alibaba-owned Huma supermarket, all items can be purchased using a QR code. Later, you can simply access that same info and order through the app when you get a craving for crabs, without the need to visit the store again. As an added feature, the app will make recommendations based on the purchases you made.
Which brings us to the question: What will Alibaba and Tencent do with all that information? Here’s the answer: Sell more stuff to you. The data collected from your purchases are stored and analyzed for patterns, sort of like creating a digital consumer profile of yourself. With this on hand, companies can then make recommendations based on previous choices you made.
One might argue that the West’s sensitive nature when it comes to privacy is a factor as to why they have not yet adopted mobile payments like in China. Another key reason is the difficulty set by the Chinese governments and banks in acquiring credit cards. Beijing-based economist Andy Mok stated that this failure of credit cards to become a norm in China is what triggered mobile payment companies to come up with cashless alternative. And because of that, the Chinese skipped credit card technology altogether.
So if you’re a foreigner and you plan on visiting China – forget the cash. In China, QR codes are king.