Market stalls in Beijing, China

With the spread of smartphones in China, many people now choose to shop online rather than in person

China’s consumers are not the wealthiest in the world. But they are years ahead of their counterparts in many developed economies in terms of how they shop and pay for what they buy. They are revolutionising the way consumer finance is conducted in the world’s second-biggest economy.

Like many changes in China, the uptake of internet and digital technologies has happened at speed. As recently as 2000, just 1.7 per cent of mainland Chinese were online. Now, the country has in excess of 700 million internet users – more than 50 per cent of the population. China’s e-commerce sales have soared from practically zero in 2003 to nearly USD600 billion last year, and now top those in the US.

Put another way, mainland China’s consumers – like those in many other Asian nations – have gone from nearly no-tech to high-tech within just a few years, largely bypassing fixed-line telephony to shift into a world where online shopping and smartphone ownership have become the norm.

China’s e-commerce sales have soared from practically zero in 2003 to nearly USD600 billion last year, and now top those in the US

China’s retail and telecommunications networks – like those in other developing economies – were underdeveloped for decades. So China’s consumers embraced the speed and choice that the internet and mobile phones brought to buying clothes, hotel stays or movie tickets. 

Anyone doing business in China needs to adapt to an e-commerce environment that is one of the most developed in the world, and growing rapidly.

China wants to continue developing its economy, and so has supported the build-out of internet-related technologies. This internet and mobile revolution is perhaps most visible in the increasingly affluent and vibrant Pearl River Delta, home to many of the country’s high-tech corporate giants. Internet penetration in Guangdong province is well above the national average. There are 78 million internet users in Guangdong, nearly 75 per cent of the population.

This has big implications for the financial and e-commerce sectors in China, which have raced to adapt to Chinese consumers’ growing appetite for digital innovation.

Just as buying behaviour has changed, so payments are becoming paperless and digital. More than 410 million Chinese now regularly use e-payment methods – nearly 90 per cent of them via mobile devices – according to official data.

Banks also are responding to the new environment, introducing new digital tools for their customers. Virtual teller machines, for example, allow customers to interact with bank staff by video, scan documents and provide e-signatures, meaning that things like opening an account become simpler and quicker.

Mobile apps are increasingly common and making it easier for customers to check their accounts or make transactions, wherever they happen to be. Thumbprint ID and voice-recognition technologies are available, adding an extra layer of security and convenience for online and mobile customers.

The next five years are sure to bring still more change. Banks and retailers will need to be nimble, and anticipate the future needs and preferences of China’s 1.37 billion shoppers.

A version of this article was first published on FT beyondbrics on 30 November 2016.

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