Millions of Chinese consumers have been barred from mobile payment apps amid record defaults.
More than 8.5 million people, mostly between 18 and 59, have found themselves blacklisted due to missing payments on things like mortgages and business loans, the Financial Times reported Sunday (Dec. 3), citing local court records.
That figure is up from 5.7 million in early 2020, driven up by the economic downturn caused by the pandemic.
According to the report, Chinese law forbids blacklisted defaulters from taking part in a number of economic activities, including buying airline tickets and making payments via mobile apps like WeChat Pay and Alipay. Blacklisting happens after a borrower is sued by their creditors and missed a subsequent payment.
“The runaway increase in defaulters is a product of not only cyclical but also structural problems,” said Dan Wang, chief economist at Hang Seng Bank China. “The situation may get worse before it gets better.”
As noted here in July, Alipay and WeChat Pay own 91% of China’s digital payment space, with cashless payments in that country adding up to $434 trillion worth of transactions each year.
And as PYMNTS wrote in October, the ongoing “rise of contactless payments may be among the most notable payments trends of the year, and it could pave the way for innovations that will shape commerce in the years ahead.”
PSCU Chief Growth Officer Brian Scott told PYMNTS at the time that the groundwork was laid a few years ago as credit unions and other financial institutions (FIs) started to create and issue contactless cards at scale and educate the public on how to use them. The pandemic was crucial in leading people to examine payment methods that didn’t involve passing their cards back and forth amid concerns about public health.
“Contactless payments have been incredibly impactful,” Scott said of the present environment, adding that “the consumers using contactless consistently are using cards more often as their primary payment device.”
Meanwhile, October saw reports that retailers that cater to budget-conscious Chinese consumers have seen a boom in sales amid the country’s downturn.
For example, online retailer Pinduoduo reported a 66% increase in revenue as its platform — which offers groceries, apparel, electronics and other items at lower prices than many other retailers — began attracting both rural and urban customers.