China’s fully cashless society a step closer

Two small private Chinese banks announced last month that they would no longer provide services involving banknotes or coins, in the latest sign that the country is accelerating its march towards a totally cashless society. Zhongguancun Bank, which serves customers in the capital of Beijing, said it would suspend cash services, including over-the-counter deposits and withdrawals as well as cash services on ATM machines, starting from April. Its decision comes after a similar move by another regional bank, NewUp Bank of Liaoning, in the northeastern province of Liaoning, which will stop cash services from March.

The latest announcements show how Chinese banks are pivoting towards digital banking. As well as the proliferation of digital payment apps such as Tencent Holdings’ WeChat Pay and Alibaba Group Holding’s Alipay, Beijing has been conducting a nationwide pilot scheme for the country’s digital fiat money, also known as the e-yuan, with more than 261 million people having downloaded the wallet app for the digital yuan. During the Lunar New Year holiday, many Chinese businesses have been expanding their capability to accommodate digital yuan. Tencent recently added e-yuan as a payment option to WeChat Pay while e-commerce giant JD.com now supports e-yuan payments for purchases made in its online stores. Last week, China’s leading on-demand services provider Meituan allowed more than 200 types of offline merchants – including restaurants, grocery stores, cinemas, and hotels – to accept payments in digital yuan.

At the same time, the suspension of cash services at banks have raised eyebrows in China, especially since the country’s central bank has repeatedly reminded ordinary merchants that they must accept banknotes and coins. The NewUp Bank of Liaoning, a private lender that launched in 2017, said its decision to stop cash services received permission from the central bank. Zhongguancun Bank, another private bank that started in 2017, said its decision to ditch cash was to “accelerate digitisation and continue expanding the development of its online services”. The moves also come at a time when the private banking sector in China is facing revenue pressure and more government scrutiny, nearly eight years after such lenders were introduced. Some private banks are also hoping to become so-called “internet banks”, but they face multiple regulatory challenges given Beijing’s crackdown on the internet sector over the past year. So far, only four private banks have obtained approval to conduct cross-regional banking services on the internet.

SCMP