This is the second in a series of posts Cognito is preparing ahead of Sibos in Beijing. The world’s premier banking conference is coming to Mainland China for the first time, so we’re using this as a chance to explore what China can teach the rest of the world about relevant technology.

Whether they fly into Beijing Capital or Da Xing International Airports, one of the first things Sibos delegates will notice are payments. They’re very different – and frequently much better. 

In China, WeChat and Alipay are by far the preferred ways of payment. International credit cards, backed by Mastercard and Visa, are distant laggards. Cash can seem quaint; businesses are nominally still required to accept it, but good luck finding change. 

The benefit of this highly integrated and centralised system is that everyone, everywhere, can send people payments. From the smallest zha jiang mian stall selling fried noodles to the massive stores of Wangfujing, the payment experience will be largely the same. Each person can scan a QR code to pay or generate a code to send funds. It’s a seamless experience designed to maximize convenience. 

WeChat and Alipay are ‘super apps,’ meaning that brands can build experiences into the payment. Expect your first few transactions to feature a bevy of discounts and coupon codes, all frictionlessly deducted at the point of sale. These super apps have social media integration, allowing the sharing of purchases with friends or receive personalized recommendations based on shopping habits.

Shopping in the West at a new store means putting in delivery and payment information through long and clunky interfaces. Not in China. The web browser here is seldom used, instead, it’s all about integrated experiences in the app.

In China, WeChat Pay and Alipay have changed the way people shop and live. Instead of using cash or physical cards, people can quickly pay for things using these Apps. Consumers can pay for groceries, clothing, or dining out by simply showing their QR code. People can book doctor appointments, order milk teas or even purchase flight tickets via the Mini programme, the Apps within WeChat where people don’t need to download the Apps separately. They’ve got cool features like splitting bills, which come in very handy when you hang out with friends.

A balanced approach 

The Chinese government, facing an economic slowdown, is keen to tap into new and emerging technologies to make further gains in the payment systems. But this needs to be balanced with concern for consumer privacy and data security. 

Yi Gang, governor of the People’s Bank of China, emphasized the importance of balancing FinTech innovation with regulation. He noted that while fintech has significantly improved financial services by lowering costs and boosting efficiency, it also brings new risks such as unfair competition and data privacy concerns. He highlighted measures like creating firewalls to prevent the cross-sector transmission of risks and exploring more convenient and secure data transactions.

Pan Gongsheng, deputy governor of the People’s Bank of China, echoed similar sentiments, noting that fintech, while promoting inclusion and efficiency, still faces challenges. Regulatory efforts must continue to ensure that fintech develops in a ‘balanced’ way, which is in line with larger government policy.

We see this in the government’s approach to major initiatives. Centrally backed digital currencies (CBDC) are being discussed everywhere, and they hold particular premises in China. The PRC is slowly integrating into the international financial system, moving away from the traditional period of isolation. The renminbi is steadily gaining a share in cross-border payments – both with Chinese entities and between third-party countries. (Cross-border digital payment services increased from RMB 2.2 trillion in 2019 to RMB 5.9 trillion in 2023.) Russia’s detachment from the international system after the beginning of the war in Ukraine has only accelerated this move. 

China’s CBDC, known as the digital yuan, has made significant progress since its introduction in pilot phases. It has already been rolled out in over 25 cities and is now inside more than 260 million wallets. While it is currently dwarfed by private options, this could potentially reshaping the finance ecosystem in the near future.

What we can take home 

It’s easy to hear about all of this innovation in China and say ‘so what?. China is such a unique market, in its sheer size of population, state-driven initiatives and entrepreneurial spirit. The Middle Kingdom is not a useful laboratory, this argument goes, since conditions can’t be replicated elsewhere.

We believe that Sibos attendees will find otherwise. Here are three potential lessons: 

• Friction isn’t a given – In China, it’s easy to see that there’s no need to put up with lengthy waits and manual entry, even though people have had to do this for decades. Everything is just at your fingertips on your mobile.
• Private and public systems can exist alongside each other – The state has provided vital resources and direction in the creation and management of a digital payments system.
• The shift to mobile isn’t stopping – Mobile payments are rising throughout the globe, but China shows just how the trend can go.

Janet Lin is based in Cognito’s Hong Kong office while Jon Schubin is in London.