When the banks closed, no-one cared

A great headline posted in The Financial Times the other day:

 When the banks closed in Wuhan, nobody cared

The Financial Times article makes clear how advanced the Chinese economy is today.

For several months this year, banks across Hubei province, an area home to 60 million people, shut their doors to retail customers. Most people in the region did not notice.

It’s a stark contrast to the experience in Europe and America, where the banks have been the central intermediaries between government intentions and citizens and small businesses’ reality. In my experience, the banks failed dramatically in Europe and America. In China, they didn’t care.

ATMs remained functional and most banks in the area offer some form of online banking. But many people in Wuhan said the payment applications they use — Alipay or WeChat Pay — were enough to get them through the crisis.

“We don’t need the banks anymore. If they close down, we don’t pay attention,” said one Wuhan resident who works as a driver. Another resident, a woman in her late 20s, said in early April: “I can’t remember the last time I went to the bank.”

This is because China has leap-frogged Europe and America from a payments and financial markets perspective – as discussed in-depth in the latest FinTech Times –  and has rapidly moved to become a cashless society. The figures vary but anything from $30 to $50 trillion moved through mobile wallets in China last year and, in my experience, if you go there and try to use cash, you’re looked at as some sort of alien creature.

However, as the FT points out, banks are still needed:

Online payments accounts require users to link to a bank account, and many companies still pay their employees through banks. But, much to the dismay of banks in China, the institutions merely act as custodians until the cash is transferred into an online payment account.

Just that they’re not recognised as important anymore.