During the coronavirus 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 the comfort of their homes. Ramped up e-commerce initiatives are also helping small businesses keep revenue flowing during an uncertain time.
Online payments are even helping to put stimulus funds into consumers’ hands more rapidly. For example, local governments 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.
Given China’s status as a global leader in digital payments, tracing the sector’s growth there merits special study as other countries grapple with what’s needed to support these crucial platforms.
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. JD.com also started selling products online in 2003.
Transforming from cash-upon-delivery to a modern mobile-payment-upon-delivery system took cooperation between a range of stakeholders beyond just fintech entrepreneurs. 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.
Social distancing rules from the current pandemic could be with the world for years. People without access to digital payments not only miss out on a tool to ensure quarantine measures during outbreaks but also the benefits of financial inclusion and ever more digitized global trade beyond COVID-19. China’s path to enabling digital payments should provide some lessons to other countries eager to follow suit.