In the previous article we discussed how the FinTech ecosystem built by China makes it the leader of the new economy. This part dives deeper into the payment mechanisms of the Modern world. The popularity of mobile payments and strong blockchain startups make China a prospective candidate to start the “third industrial revolution.”

A brief history of money

History shows us that the torch of high economic growth was often taken by the country which was first to embrace revolutionary payment methods. The national payment system is the basis of the economy. The economic evolution of the world was a history of three jumps: from barter to precious metals, from precious metals to cash, from cash to bank-based obligations as stocks and credit cards.

Each financial transition accompanied a significant shift in the economic life of humanity. Precious metals introduced humans to the concept of the commercial exchange, cash facilitated trade in the territory of the nation-state, stock and credit cards established today’s fast and globalized economy.

Now we are staying on the edge of another complete remaking of our world order. As with previous significant shifts, the birth of the new AI-driven economy should accompany the creation of the new financial system. China gives a hint on how this system will look like: a symbiosis of mobile payments and blockchain-based trust systems.

Mobile payments in China

China has made a full transition to mobile-based payment systems. It has not only stopped using cash, which is considered atavism by most economists, but it has also jumped over current credit card economy. Using smartphone is much more comfortable: it is always on you, and no delays for entering pin code are needed. Moreover, from the psychological perspective, people spend more freely when they don’t need to get something specifically for money. The smartphone is not explicitly linked to keeping the money, so people tend to be more comfortable spending while using mobile payment systems.

The New York Times provided the best illustration of how far China is from the current economy of Visa and MasterCard:

“One friend didn’t realize how reliant she has become on mobile payments until her bank called her. She had left her A.T.M. card in the machine three weeks earlier and hadn’t noticed its absence”.

The process of mobile payment is as simple as possible. To complete the amount, one of the parties shows merely the QR code linked to her bank account. The QR is scanned, and money is transferred. The speed and simplicity of the process compared with cash or conventional credit cards looks the same as the transition from gold to cash for our ancestors.

The main advantage of Chinese payment systems is it’s multitasking capabilities. As the FinTech report report by Brookings Institution, a Washington based think-tank, says:

“Unlike the disaggregated mobile payments market in the United States — where PayPal and Visa Checkout are used for online shopping, Apple Pay and Android Pay serve as mobile-phone wallets, and Venmo and Facebook Messenger are common for transferring money between friends — Single platforms in China integrate all of these functions”.

In the “Western” countries the financial systems are lacking behind. The same report by Brookings Institution says that while in China the volume of mobile payments exceeds $22 trillion, mobile payments in the US, the technological leader of the western world, reaches only $112 billion. Noticing the mobile blindness of their western counterparts, Chinese financial behemoths as Tencent and Ant Financial are spreading across the globe: The Economist says that Ant already allows Chinese tourists to use its services in Dubai and Disneyland.

Chinese FinTech doesn’t forget to target African and Asia economies. Ant Financial has already established a presence in India, Thailand, Singapore, Indonesia, the Philippines and South Korea. This strategy is fully consistent with global macro trends which say that mobile payments and online lending are the engines of high economic growth in yet undeveloped countries. If China manages to create a financial infrastructure in these countries its position as the leader of the new economy is more or less secure.

New economy = mobile + blockchain

Each transition to the new financial system depends not only on payment technologies but also on new mechanisms of establishing trust. Today’s economy is driven by so-called trust intermediaries which are banks and law experts.

New ways of securing trust should accompany the jump to mobile payments and online lending. The solution lies in blockchain and blockchain-powered tokenization technologies. BANKEX has already shown how its protocol, which combines the use of blockchain and Internet of Things revolutionises real estate market, car sharing or even farming business.

As mobile payments will substitute credit cards, tokenization will overtake conventional ways of raising capital. These are two parts of the same revolution: mobile payments at the individual level and tokenization at the corporate one. As mobile payments are faster than credits cards, tokenization takes less time, is more secure and costs less than any other ways of raising capital. If China wants to become the leader of the new economy not only on the consumer level but also on the corporate one, it has to continue development of its blockchain initiatives.

Overview of Chinese payment systems shows that China has all opportunities to become the leading economy in the world after the third industrial revolution. Mobile payments, which completely overtook cash or credit cards in China, are more efficient than any other now-existing way of transferring money. China is now building an ecosystem of mobile payment systems throughout the whole world, which secures its position as the leading economy. However, if China wants to establish its leadership not only on the individual but also on the corporate level it has to invest more in the initiatives working with blockchain and tokenization.