As mobile payments rapidly develop worldwide, the use of cash is steadily declining. However, there is a stark contrast between the two economic superpowers of China and the United States in terms of cash usage. In China, mobile payments have become the mainstream method of payment, while in the US, cash remains the primary means of payment. So, what accounts for this significant difference? This article highlights several behind this notable contrast.
Different development of mobile payment markets
In China, the mobile payment markethas grown incredibly fast. This is due to the rapid development of China's internet and mobile technology, as well as strong government policy support. In China, mobile payment apps like Alipay and WeChat Pay have become mainstream, covering nearly all online and offline scenarios. In some big cities like Shanghai and Shenzhen, cashless communities and business districts have even emerged. In these areas, people hardly need to carry cash and can entirely rely on mobile payments for their purchases.
In contrast, the US mobile payment market has developed relatively slowly. Although there are some mobile payment apps like Apple Pay and Google Wallet, their adoption rates are comparatively low. In the US, credit and debit cards remain the primary means of payment, and a large number of people still use cash.
Divergent tax systems
China's tax system promotes the development of online payments. Chinese personal income taxis withheld and paid by employers and has relatively low rates. This reduces the incentive for individuals to use cash, as online payments do not increase their tax burden. Moreover, the Chinese government has introduced tax incentives for using online payments, such as exemptions from value-added tax and consumption tax.
In the US, personal income tax is self-reported and paid by individuals, with relatively higher rates. This increases the incentive for individuals to use cash, as cash transactions can avoid or reduce tax scrutiny. Furthermore, due to the lack of sufficient tax incentives for online payments and sometimes even additional taxes on online transactions, such as digital service taxes, cash usage retains a significant presence.
Impact of social security systems
China's less comprehensive social security system has promoted the development of online payments. China's social security systemdoes not cover everyone, and many people do not receive adequate social welfare, necessitating savings for future risks and needs. Using online payment platforms makes it convenient to invest, manage finances, and save, increasing the returns on funds. Additionally, these platforms offer various convenient services, such as healthcare, education, and travel, meeting people's diverse needs.
The US boasts a more comprehensive social security system with widespread coverage. Many people can rely on government or employer-provided benefits to address future risks and needs, without the need for extensive savings or investments. Moreover, Americans generally have little interest or demand for the services offered by online payment platforms and prefer traditional methods of accessing services.
Chinese people value efficiency, convenience, and innovation in their daily lives and are willing to try and adopt new things. Online payments align with these values, saving time, energy, and costs while improving the quality of life. Chinese people also emphasize social interaction, sharing, and engagement, and online payment platforms provide these features, such as red envelopes, transfers, and comments.
In comparison, Americans prioritize freedom, privacy, and security in their daily lives and are hesitant to change their habits. Online payments can potentially expose personal information, account funds, and consumption behavior to third parties. Americans also place importance on tangible objects, tradition, and symbolism – qualities embodied by cash as a tangible, historically significant, and meaningful item.
Different consumer habitsshaped by business systems
The US payment transaction system is primarily dominated by Visa and Mastercard. In the 1980s and 1990s, the US experienced rapid growth, and the national economy soared, with credit card transactions quickly spreading across developed countries. Decades of commercial promotion and various incentives have reinforced consumer loyalty, deeply embedding this payment method into the entire US consumption structure. Cash transactions also persist. Mobile payments, supported by technology like QR codes, have not been disruptive enough to compete directly with established players, and therefore cannot fundamentally change the consumption structure.
China, on the other hand, began transitioning to mobile payments around 2010 due to explosive growth in online retail. This transition has been much easier than in the US, where the credit card business system is already mature.
In conclusion, cash has been replaced by mobile payments in China, while in the US, cash still reigns supreme. This is due to differences between the two countries in areas such as mobile payment market development, tax systems, social security systems, consumption structures, and cultural habits.
Another important point to note is that due to the continued popularity of cash in the US, counterfeit bills are much more prevalent compared to China. Therefore, American businesses that primarily deal with cash transactions should equip themselves with a bill counter machine to effectively prevent accepting counterfeit bills, while also improving cash management efficiency.