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Business trends

In China, cash is no longer king

Rural residents, the old and tourists suffer as shops reject paper and plastic

Alibaba's Alipay is one of the leading smartphone payment services in China.   © Reuters

TOKYO -- As more shops and restaurants in China move toward only accepting smartphone payment services such as Alipay, the elderly, visitors from overseas and people from rural areas who are unfamiliar with or lack access to these systems are running into problems paying with cash or credit cards.

A cashless society has many advantages, including lower transaction costs. But it also creates a divide between those who can make cashless payments and those who cannot.

The case of Hema, a futuristic supermarket chain specializing in fresh food, illustrates the problem. The stores were opened by online retail leader Alibaba Group Holding, which pitched them as a new experience that combines online and bricks-and-mortar shopping. Customers can buy fresh food at the stores or go online to have items delivered. The outlets also serve as warehouses.

One catch: Hema customers could only pay for items using Alibaba's Alipay, either through smartphones or at self-checkout counters in the shops. This saved money on cashiers, but after complaints about retailers refusing cash spread, the authorities intervened and Hema had to install cash registers, Economic Daily, a Chinese news outlet, reported.

In China, making purchases through smartphones and QR codes is common. The two most popular payment services are Alipay and WeChat Pay, which is run by Tencent Holdings. According to one recent study, 98% of people with smartphones in urban areas use their devices for mobile payments.

The growing frequency of these payments has led some shops to stop accepting cash altogether, partly to eliminate problems with counterfeit currency, which is rampant in China. It also eliminates the hassle of storing or depositing cash.

But the shift toward electronic-only payments has drawn criticism because some people still prefer cash or have no other means of buying. In 2017, China had an estimated 772 million internet users, or 56% of its total population. But in rural areas there are still many people without access to the internet, let alone smartphones.

Some elderly people who have the necessary gadgets have difficulty with Alipay and other payment apps. Retailers that do not take cash have attracted complaints that they are discriminating against those who are not tech savvy.

A woman makes a purchase with her smartphone at an open-air market in China's eastern Shandong Province.   © AP

The People's Bank of China, the country's central bank, on July 12 announced a crackdown against retailers that refuse to accept cash. There were reportedly 602 violators over a period of five months. The announcement prompted Hema supermarkets to put in registers.

But as cash transactions becoming rarer, many Chinese retailers have difficulty making change. This reporter had no choice but to pay with a credit card at a restaurant in Hangzhou, southwest of Shanghai, when the restaurant refused to take cash. On another occasion, a restaurant in Shanghai refused to accept the reporter's credit card. Spread of credit cards has slowed in China as smartphones become the primary method of payment.

Making mobile payments is difficult for short-term visitors to China because, with some exceptions, using Alipay and other payment apps requires a bank account in the country. Visitors also need to have a Chinese mobile phone number to use text messaging services. They are also required to provide detailed personal information, including passport numbers, to increase their initial credit limit of 1,000 yuan ($145).

If mobile payment systems are to reach their full potential, they must be more inclusive so as not to impede transactions among people from different countries and backgrounds.

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