Why a complete rejection of cash can be too expensive for developing countries
Foreign Policy published a large
material with a story about the problems that China is experiencing because of the massive spread of contactless payment technologies. Today in the Middle Kingdom, the phone payment has become so popular that even street musicians accept money, and many retailers refuse to give change when paying in cash.
In practice it turns out that, despite all the convenience of such a scheme, for many citizens it carries great problems. World Bank Global Findex, China has about 200 million residents who do not have access to the financial system - that is, they do not have a bank account. This is a common problem for many developing countries, where citizens often either do not have documents, or they receive income only in cash and do not need a bank account.
In addition, the study show , that up to 70% of rural residents in China do not use the Internet and they do not need smartphones. In the "risk group" are also users of the older generation who find it difficult to master new technologies.
However, the spread of new technologies can make the lives of these people more difficult, since contactless payment systems imply the existence of accounts and bank cards - they then connect to mobile payment systems. If such applications become the default payment method, hundreds of millions of people all over the world will simply not be able to pay for goods and services. This can have a serious negative effect on the economy of individual regions.
Chinese companies Alibaba and Tencent adopt the experience of American business - they advertise their products as socially significant. At the moment, their goal is those users who are physically connected to the banking system, but do not use contactless payments.
In particular, Alibaba works separately with elderly users - in marketing materials the company appeals to respect for elders, which can be expressed, among other things, in helping elderly relatives set up mobile payments. In the framework of this campaign Alibaba has released a guide to working with the Alipay system, which is written in the style of the child's letter to the parents.
The size of the market and the size of the population of China is such that the technological corporations will have enough users for a long time. They will not feel the loss from the fact that one of the residents of rural areas will not use the applications. However, if as a result the economic activity of these citizens will decline, this is unlikely to suit the state. And then we can expect, including new initiatives in the field of regulation of contactless payments.
In this issue, the powers of developed countries are also active. For example, in Sweden turned around sharp discussion about the advisability of a full transition to non-cash payments. Local politicians are concerned about the country's dependence on payment instruments, which are not fully controlled by the state.
In this case, in the event of a serious international crisis and hypothetical restriction of access to these instruments, the country's residents may have difficulties in paying their basic needs and receiving money. The Swedish parliament of the country conducts an internal analysis of legislative initiatives proposed by the central bank - deputies are considering all possible difficulties connected with the use of cash and with the refusal of them.
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