How digital payments can help China cope with pandemics.

• Digital payments allow people to access goods and services while in quarantine or social distancing.
• SARS epidemic in 2003 expedited China’s path in launching digital payments and e-commerce in the country.
• A robust identification system, widespread, consistent internet access and trustworthy ways to get money into digital formats could be important for digital payments to thrive.

During the Covid-19 crisis, digital payments have been keeping economies running and helping people reduce contact with virus.

Contactless digital payments at the point of sale, such as facial recognition, Quick Response (QR) codes or near-field communications (NFC), can make it less likely for the virus to spread to others through cash exchanges. Digital payments are limiting in-person transactions and ensuring consumers can buy essentials from their comfort.

Online payments are even helping to put stimulus funds into consumers’ hands more rapidly. For example, local goverments in China have distributed vouchers through WeChat Pay to encourage immediate spending.

China’s move toward a cash-lite society has helped to sustain quarantines and will, as the economy restarts, help it to reduce disease transmission during that rebound.

SARS and its impact

China’s experience with the SARS epidemic in 2003 helped launch digital payments and e-commerce in the country. SARS forced what would become a permanent shift in behaviours: consumers holed up in their homes had to turn to previously untrusted e-commerce sites, while Chinese companies adopted e-commerce for sales because people refused to meet in person. Alibaba launched Taobao that year, its first consumer-facing e-commerce website, and soon after created Alipay to help solve payments and trust problems that inhibited the growth of online shopping.

They also transforming from cash-upon-delivery to a modern mobile-payment-upon-delivery system. Banks were cooperative and the government focused on building crucial infrastructure in the areas of identity, internet access and legacy payment systems, all while encouraging domestic online payments and digital commerce through light-touch regulations.

As SARS has shown in China, the world after COVID-19 will likely be more digitized. Countries lagging in digital payments should proactively build out their identity, Internet and banking infrastructure as China did, to take advantage of these advancements. It is also important, especially for smaller countries, to build a domestic payments system based on global standards that is interoperable with the rest of the world to actively participate in the global economy.

Still, digital payments are now a backbone to China’s vibrant digital economy. Contactless payments to taxi drivers, vendors and even temples and beggars are possible through scanning a QR code. Payments for daily essentials, such as mobile phone bills, utilities, rent or internet fees, can all be made through mobile payments or online banking in China. Governments at all levels there also accept mobile payments as a payment method. Digital payments, in China, have almost become a public good.

China’s path to enabling digital payments should provide some lessons to other countries eager to follow suit.