Consumer demand for cashless payment methods is growing, driving a global movement toward financial inclusion

Money facilitates trade. For thousands of years, money was physically held and exchanged as cash, but in the modern world, more people rely on other forms of exchange.

Credit cards and other forms of payment have for decades enabled ever-growing demand for products and services to be satisfied. Now, the technological advance in cashless payment options is opening more ways to fulfill that demand, including uncovering latent demand that consumers may not yet recognize.

Consumer demand for cashless payment methods is growing, driving a global movement toward financial inclusion. For the world's 2 billion unbanked consumers - adults without an account at a bank or other financial institution - cashless payments offer a way to participate in the modern and connected consumer economy, including basic financial services.

The technology that enables digital storage and exchange of money becomes increasingly relevant with the exploding global growth in internet access and the penetration of mobile devices. In China alone, we estimate that growth in access to cashless payment options will lead to $170 billion in additional consumer spending over the next decade.

Globally, we project that contribution will be as much as $10 trillion - almost as much as US consumers spend in a year.

As the difference between online and offline shopping for retailers is blurring in China, shoppers seamlessly switch between online and offline channels with ease. This rapid evolution of the retail landscape has greatly changed Chinese payment practices.

In recent years, China has seen increasing innovation in digital payments via a variety of methods, including QR codes, and their use is extremely popular today.

A Nielsen survey in March found that 86 percent of people in China have paid for an online purchase in the past six months via a digital payment system, far higher than the average 43 percent in 26 other countries.

The report also found that 53 percent in China had shopped online using a direct debit bank account, 49 percent had paid cash on delivery and 46 percent had shopped with credit card.

Credit card and bank account penetration is lower in most emerging and developing markets, including China, so consumers seek and use other forms of cashless payment - and are likely to be the most immediately interested in mobile platforms that do not require a bank or credit card account.

The Nielsen survey shows that in China, where the World Bank estimates that only 16 percent of consumers have a credit card, consumers are more open to digital payment methods such as Alipay, as they are seen to enhance the shopping experience, especially in terms of e-commerce, give consumers access to products and services better suited to their preferences and needs, and help them manage their spending and borrowing more effectively. They also enable the integration of all aspects of their experience across marketing, advertising, shopping, social media, entertainment and financial services.

A platform capable of delivering all of this does not yet exist, but hints of what it will look like, and who might provide it, are emerging.

Social media companies may be particularly well placed. In China, WeChat, a mobile messaging service launched in 2011, began by enabling users to exchange text and multimedia messages, and to share pictures and location information. In early 2013, consumers were able to link their WeChat accounts to checking accounts and sending payments. By last year, the service was reported to have 600 million users a month, and WeChat plans to launch an online bank, WeBank.

Elsewhere, Facebook is moving to equip its messenger service with payment and other consumer services.

We have identified four main drivers of this accelerating demand for digital payments: Growth in household access to mobile technology, global economic growth and the rise in household incomes; the push toward financial inclusion supported by development policy leaders and individual consumers; and the consumer need for safe money storage and exchange.

Internet penetration in China now is about 50 percent, and Nielsen projects that this figure will grow to 68 percent by 2020, bringing 300 million more people online. In addition, more than 70 percent of Chinese people now access the internet via mobile devices, while worldwide it is 61 percent.

So we're expecting more Chinese consumers to adopt the use of digital payment, particularly mobile payment.

As new forms of digital payment alter purchases, the potential to collect data expands exponentially. For retailers, cashless payments will influence which retail channels grow and how they intersect. All businesses will find new ways of marketing to consumers, engaging with them and measuring their behavior.

Better information about consumer behavior and needs will feed into strategic business decisions relating to growth priorities and product and service innovations.

Consumers will benefit from all of this. From their perspective, it is part of a move toward financial inclusion that will draw the world's unbanked population into the modern consumer economy.

In all countries, particularly emerging nations, increased demand for cashless payments is driven by the need for financial inclusion and supported by the growth in internet penetration and online shopping.

The scope of the opportunity is bigger still because cashless payment platforms sit at the heart of a transformation in the way consumers shop that will bring about new connections between consumer activities, consumers and brands.

The author is president of Nielsen Greater China. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 10/07/2016 page9)