Alibaba’s “cashless week” to boost mobile payments is worrying China’s central bank

Who needs cash?
Who needs cash?
Image: Reuters/Ali Song
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You know you’ve gotten big when the central bank worries about your promotional activities.

Such is the case with Ant Financial, which runs the biggest mobile payments platform in China and, indeed, the world: Alipay. This summer the company is aggressively promoting the idea of cash-free living. Considering it has well over half a billion Alipay users, its success with such efforts can affect cash circulation in the world’s second-largest economy.

Enter the People’s Bank of China, responsible for issuing and administrating the yuan. The bank has been leery of two Ant Financial initiatives. One, the first annual Alipay “cashless week,” ended yesterday (Aug. 8). Another, ongoing, aims to get nearly all the physical merchants in five cities (Guiyang, Fuzhou, Tianjin, Wuhan, and Hangzhou) accepting Alipay by year’s end.

In response to Alipay’s cashless week, the PBoC reportedly sent a notice to its regional offices. A snapshot of part of the notice was obtained by the Beijing-based financial news outlet 01Caijing and posted on its site. Quartz made a screenshot of it, below, before it was removed from the outlet’s site on the night of Aug. 9 Beijing time. (We have since updated this article to include the screenshot.)

The snapshot of the notice reportedly issued by People's Bank of China.
The snapshot of the notice reportedly issued by People’s Bank of China.
Image: 01Caijing

In translation, it reads:

Some cities have been rolling out cashless payments, or working with Ant Financial to promote “cashless city” activities, during which some of the promotion themes and actions have interfered with the normal currency flow of the yuan. That has had a relatively big impact on society and created misunderstandings among the public. [Branches of the central bank] should immediately rectify and make guidance [to local commercial banks] on inappropriate wording and actions accordingly.

By way of example the PBoC praised actions taken by its branch in Wuhan, the capital of the central Hubei province. The branch called Ant Financial’s marketing department on July 31, just before cashless week began, and asked that it conduct only a “low-profile promotion,” in order to prevent the “phenomenon of cash being rejected.” The PBoC didn’t respond to Quartz’s questions about the notice.

Alipay didn’t require that participating merchants reject cash to participate in cashless week. But some might have anyway. According to the Beijing newspaper Fawan, local outlets of the grocery chain Hema Xiansheng—owned by Alibaba, the parent of Ant Financial—did not accept cash (link in Chinese) during the promotion. A company spokesperson said that Hema “offers both cash and mobile payment options at all its 13 stores” in the country.

Across the country, more than 10 million merchants—all with physical stores—participated in the promotion. Customers using Alipay at these shops earned chances to win in-app rewards ranging in value from about 10 cents to $700.

For the PBoC, more such challenges will likely arise given China’s increasingly cashless society. Other central banks are grappling with the problem, too, including Sweden’s, which in March 2016 said banks had reduced their cash handling services too fast and should be legally required to keep offering them.

Today 14% of China’s population relies on mobile payments to get around, carrying no cash, according to a survey conducted by (link in Chinese) Renmin University of China, the research firm Ipsos, and internet giant Tencent. And the young carry around far less cash than the old. A person in their twenties, the researchers found, will on average bring $26 when going out, compared to $83 for someone in their fifties.

What’s more, the fierce competition between Alipay and WeChat Pay—the rival platform by Tencent—will generate ever more awareness of the dwindling need for cash.