Is mobile payment going too far when cash has become unacceptable?

When mobile payment with smartphones has become the means of choice at retail outlets, the central bank of China needed to remind businesses they should not reject cash payment.

Once upon a time, people said “cash is king”. Not anymore.

In most retail outlets in China, mobile payment with smartphone apps WeChat Pay (of Tencent) and Alipay (of Alibaba) has become the de facto option. Customers with credit or debit cards only, including the cards on UnionPay (China’s clearing platform), are sometimes in bad luck. It turns out even cash payment may not go all the way, which prompted the central bank, People’s Bank of China, to issue a warning notice to the retailers that rejecting cash is against the law.

This fast and massive move towards mobile apps based payment dwarves the slow uptake of NFC based contactless payment championed by the technology companies. This is despite the tech heavy weights Apple and Google having been supporting NFC payment since 2014. The enthusiasm in which consumers and businesses embrace it, even with the clout of Apple and Google thrown behind it, has been underwhelming.

According to the research firm Berg Insight, the total number of NFC enabled POS terminals grew by almost 100% in 2017 to reach 54.5 million, most actively in North America and Western Europe. Only about 30 million of the terminals have been activated.

Apple has refused to disclose user numbers or transaction values related to Apple Pay, although different research has put the number of users who could pay with Apple Pay and who actually did it at about 3%. The uptake of Android Pay is no better. The comparable adoption rate is estimated at about 1%.

It is safe to say Apple CEO Tim Cook’s ambition to replace wallets with Apple Pay has not gone too smoothly. Mr. Cook himself was reported to have been rejected to pay for his coffee with Apple Pay by a barista, reported The Information.

In contrast, WeChat Pay and Alipay did not only handle over 90% of China’s $16 trillion mobile payment transactions in 2017, they are also actively expanding overseas. An agreement was signed last week with the Kenya based Equity Bank to bring the services to eastern Africa including Uganda, Tanzania, Democratic Republic of the Congo, South Sudan, and Rwanda, in addition to Kenya. With a smartphone penetration level much lower than in China, we do not believe retailers in Africa will rush to refuse cash payment though.