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Infrastructure and Incentive: Making Cashless a Reality

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I often reflect on how quickly China is moving towards being cashless, as are parts of Africa and much of India. I then realised that it is a strong mix of simple infrastructure and strong incentive.

In the case of M-PESA in Kenya, there was no method of making payments from city to village, except physically which is fraught with danger. Therefore, when M-PESA launched, it had a simple market infrastructure – mobile text messages – and a strong incentive to use it – ensure the money gets there and that you don’t get mugged. In fact, most of the mobile payment successes I’ve seen have this underlying incentive: it’s safer, you don’t need to carry cash around anymore, you won’t get mugged.


In China, it was different. Alipay was rolling out QR code payment systems, which is also simple infrastructure. All the merchant needs is a piece of paper with a QR code on it. The challenge then is how to get people to use the app to pay by QR code. Tencent had the answer to that one with Red Letter Days to say Happy Chinese New Year. This has been a Chinese tradition to swap a red envelope with some cash insider for years; they just automated that process and made it fun and easy. This is why China is almost cashless six years later.

In India, powered by Alipay technologies, PayTM has taken over the mobile payments market in the same way. A friend of mine was just telling me how she is based in the UK but visits her family in a remote rural Indian village every year. This year she was amazed when her mom brought some nuts from the village street stall and payed by QR code. Simple infrastructure and strong incentive to use it. In this case, the incentive was demonetisation.

Then I look at Europe and America and … well, it is actually embarrassing. The number of people using mobile wallets is still dismal, and the take-up of contactless payments impressive but slow. Apple Pay’s usage is pathetic and the numbers for Andorid Pay and Samsung Pay aren’t much better.

I then sat back and thought that maybe it’s because the infrastructure is far more complex – all the merchants need NFC devices to take contactless – and the incentive is weak – it’s easier to pay by card. Now don’t get me wrong, as I’m not knocking the technology, but I use contactless card payments everywhere … except at Heathrow airport. For some reason, those guys just have not got contactless at their duty free. The reason: the merchant has to pay to change the terminals, and there’s no incentive to do so. They can take Alipay and WeChat Pay – it’s just a QR Code – but offer them Apple Pay and they wince and say no.

The second reason why I use contactless cards rather mobile apps is that I can’t be bothered flicking around on my phone when the cards just popped out easily, tap and done. My friends say, ah but if you had an Apple Watch … well, I’m a luddite. I got an Apple Watch, took it out the box, wore it a few days and … put it back in the box.

The incentive to use it is not strong enough, for me.

Then, going back to my examples of Africa, India and China. The incentive is strong and the infrastructure simple. The alternatives to the systems were just not in place before, so these new and easy and convenient services make absolute sense. Hence, much of Africa, India and China will be cashless in a few years.

In Europe and America, the incentive is weak. There are many alternatives to the systems, and much of them preferred in the form of cash and card. The infrastructure is in many ways over complicated too. For example, the mobile wallets in the Nordic region are bank issued and lack interoperability (something they are working on solving).

All in all, it seems that the simple infrastructures with strong incentives for usage will demonstrate that worlds which had little before will leapfrog those with a great deal. But then it’s often the case that the first to move is the last to leave.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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