The central bank of China has warned of the declining relevance of cash, amidst a surge in the adoption of digital payment systems.
According to reports in the Financial Times, the People’s Bank of China (PBOC) has become concerned about the pace at which consumers and businesses are moving towards digital systems.
In particular, an increasing number of tourists in China are paying by applications like Alipay and WeChat Pay because visitor attractions are preferring digital to cash payments, or refusing to accept cash altogether.
The problem had become so acute, the bank was forced to remind merchants that refusing to accept renminbi cash is illegal.
In a statement, the bank said the refusal to accept cash was damaging the legal status of China’s currency and undermining the right of consumers to choose their preferred payment methods. According to the PBOC, “In recent years, there have been problems with the circulation of renminbi cash, and the people’s response has been intense. 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 issue has been on the bank’s radar for some time—even in 2017, some regions of China were reporting as much as 90% merchant transaction volume through these two fintech apps. The apps are even used for payments including salaries, buying groceries and shopping at local markets.
The People’s Bank of China has been a vocal opponent of cryptocurrency, and highly skeptical of digital payment systems, over concerns they could undermine government control of the financial system.
However, as some analysts point out, moving towards digital payment systems could ultimately give governments more control, with access to detailed transaction data not available in the cash economy.
The developments in China correspond to trends in markets elsewhere, with consumers increasingly turning to fintech apps and crypto payments as an alternative to cash.
With an ever increasing number of banks and financial institutions developing digital payment systems and investigating blockchain payments, it looks like this trend is set to continue through 2019.
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