The ascent of mobile payments in China is quickly rendering cash obsolete, even as China’s central bank cracks down on merchants who refuse to accept bank notes and coins and tries to stop Ant Financial and Tencent dominating retail payments.
The value of Chinese mobile payments reached Rmb120tn ($17tn) in 2017, up from Rmb59tn a year earlier, according to figures from iResearch. Alibaba affiliate Ant Financial’s Alipay and Tencent’s WeChat Pay dominate the sector.In 2018 a nationwide campaign by the People’s Bank of China identified 602 cases of illegal cash refusal, of which 558 have been resolved through policy communication and “criticism-based education”, according to the official Shanghai Securities News and a central bank spokesperson.In July the PBoC felt compelled to issue a formal notice clarifying that renminbi cash is legal tender in China and that refusing it is illegal.
“In recent years, there have been problems with the circulation of renminbi cash, and the people’s response has been intense,” the PBoC said in an accompanying statement.
“Consumers at tourist areas, restaurants, and retail merchants have had their cash refused, which has damaged the renminbi’s legal status and consumers’ right to choose between payment methods.
”The government has taken a series of steps to ensure Ant Financial and Tencent do not grow too powerful. From January, all third-party payment groups will be required to hold 100 per cent of customer cash deposits in non-interest-bearing accounts at the PBoC, depriving Ant Financial and Tencent of up to $1bn in interest income. The central bank also declined to license the two groups to launch credit-rating businesses, due to concerns the scores could be used to strong-arm users into purchasing the groups’ other products.
Freshhippo, a line of futuristic supermarkets launched by Alibaba late last year, was among the groups investigated by the PBoC for refusing cash.
Alibaba said its stores had always accepted cash but that the central bank had expressed concern that cash payment areas were not clearly visible. The group has since adjusted its store layout.
At a Freshhippo outlet in Shanghai in December, a group of mostly elderly patrons queued at the single checkout line that accepts cash.But at other merchants, refusing cash has become relatively common.At Luckin Coffee, the Chinese start-up that just was valued at $2.2bn in a $200m funding round last month, staffers at four outlets in Beijing and Shanghai said the company did not accept cash.
“All the franchised outlets of Luckin should order on our app and pay online,” said a staffer at a branch in Shanghai’s Huangpu district.
Pressed about the law forbidding merchants to refuse cash, the staffer agreed to accept a banknote and use his own mobile phone to complete the official payment.Luckin did not respond to requests for comment.
On Weibo, China’s version of Twitter, one user complained about cash being refused at a shopping mall restaurant near Shanghai’s People’s Square. “Refusal of cash — will the great big central bank take action?” he asked in a post that tagged the PBoC’s official Weibo account.
“Within one minute, three customers took out cash and were refused.
One cashier taught a mother and son on the spot how to activate WeChat pay.”