The Chinese Are Skipping Cash For Fintech

The Chinese are skipping straight from cash to digital finance.

- Shai Oster

You forgot your wallet, and it’s four flights up to your apartment in Shanghai’s French Concession. No worries. You’ve got your smartphone. Open Tencent Holdings’ WeChat, the Chinese Twitter on steroids, and tap China’s versions of PayPal, E*Trade, TripAdvisor, Amazon, and Uber rolled into a single app. Order and pay for your taxi and then book a restaurant where you’ll split the bill electronically with a friend. With a few minutes to spare, transfer money into the mutual fund run by e-commerce giant Alibaba Group Holding. See a poster for a hot new movie? Snap a photo of it and let search engine Baidu find a theater and buy you tickets for later that evening.

Financial innovation is bubbling up around the globe, but China is where digital banking, investing, and lending have gone mainstream. Technology companies armed with financial apps are challenging banks and other intermediaries for a market with 1.3 billion people and $7.8 trillion of deposits. Tencent’s WeChat (called Weixin in Chinese), Ali baba’s Alipay arm, and Baidu are leading the way with digital wallets that let consumers manage their money via their phones. “Financial innovation is being discussed everywhere—in New York, London, San Francisco, Hong Kong,” says Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia. “But mainland China is where it has gone beyond talk and is really having an impact. What we’re seeing here is the future of global banking.”