cashless payment
China is racing to bridge the gap with measures like allowing international credit cards and raising mobile wallet transaction limits for foreigners. Pexels

China's Central Bank cracked down on seven businesses last week, including a KFC and state-owned firms, for refusing cash payments. The move comes as Beijing prioritises making spending easier for foreign tourists.

The People's Bank of China has long imposed such penalties. However, this time, the targeted employees worked for major corporations, highlighting the pervasiveness of cashless payments in China.

The bank fined a Wuxi KFC $4,140 for refusing cash from a breakfast customer, and the employee involved faced a $410 fine. According to the latest government data, the average wage in Wuxi is about $18,000 annually (roughly equivalent to £14139.90 at the current exchange rate).

The central bank also targeted branches of state-owned giants like China Post (Inner Mongolia), New China Life Insurance (Gansu), and PICC Property and Casualty (Jiangsu) for similar cash-rejection offences.

China, aiming to bolster foreign investment and tourism post-pandemic, has made accepting cash payments mandatory for businesses. Before the pandemic, China had a strong foundation for cashless and QR code payments. Lockdowns further accelerated this trend.

Cash Gap Creates Hurdles For Tourists In China

By the end of 2023, state media reported China's mobile payment penetration rate reached 86 percent, the highest globally. This widespread adoption, however, has become a hurdle for foreign visitors arriving in a newly reopened China. Many now struggle to find vendors accepting cash or even credit cards.

China's major payment platforms, Alipay and WePay, have introduced new measures to improve accessibility for foreign visitors. These include allowing international bank card linking and raising foreigners' transaction limits from $1,000 to $5,000.

Beijing is ramping up efforts this year by urging businesses like three-star hotels and taxis to accept international credit cards. The broader shift, however, has been sluggish.

For example, according to travel companies, a Shanghai taxi company announced that foreign credit cards would be accepted in just 50 taxis this April, a small fraction of the city's over 50,000 licensed cabs. Tourism remains a significant revenue stream for China, with state-affiliated tourism research predicting the sector to generate roughly $800 billion in 2024, a substantial increase from pre-pandemic levels.

Xu Hong, Dean of Nankai University's College of Tourism and Service Management, attributes the inconvenience some foreign visitors face primarily to the disparity in payment practices between China and other countries.

"It is imperative to develop diversified means of payment and provide convenient and tailored services for foreign visitors to meet their payment demand," Xu added.

Zhu Keli, a researcher at the China Institute of New Economy, believes improved payment services can catalyse foreign spending in China, thereby boosting related industries. Zhu further emphasised that a seamless payment environment can also contribute to China's positive image on the world stage.

Is Cash A Relic Of The Past?

In 2022, China's announcement to scrap quarantine requirements for international travellers fueled optimism in European and Asian markets, anticipating a resurgence in the world's second-largest economy.

Despite this optimism, international arrivals have remained sluggish. In 2023, foreign visitors to China only reached around 35 million, a mere 30 percent of pre-pandemic levels.

China's rapid shift towards cashless payments has raised concerns for older adults. A central bank survey revealed that 75 percent of seniors in the country still rely on cash for daily transactions. This actually highlights a global trend.

A 2023 survey suggests a significant shift towards cashless preferences, with contactless payments like Apple Pay poised to surpass cash in physical stores. Notably, the UK reported a staggering 87 percent of in-person transactions being contactless in 2022.