SHANGHAI: Cash is an afterthought in urban China as mobile payments – driven by booming mobile internet penetration and platforms such as WeChat and Alipay – have transformed China’s consumer economy in less than three years.

According to a report by the New York Times, cash payments are increasingly rare in China’s biggest cities as platforms such as WeChat and Alipay offer more convenience for Chinese consumers.

The popular payment method uses QR codes, allowing consumers to make payments to small roadside stalls, shopping malls, utility companies and everything in-between. (Read more about how WeChat is transforming Chinese life in WARC’s report: Advertising beyond imagination: China emerges as a trailblazer in mobile marketing.)

The rise of mobile payments in Chinese cities is particularly extraordinary given that just three years ago the Chinese economy was still mostly cash-based. Data by consulting firm iResearch revealed that China’s mobile payments market is now 50 times larger than that of the US, with an estimated US$5.5 trillion in transactions compared to US$112 billion in the US.

“From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,” said Richard Lim, managing director of venture capital firm GSR Ventures, in comments to the New York Times.

Recent data indicates that Ant Financial and Tencent – the controlling companies of Alipay and WeChat respectively – are set overtake global brands such as Visa and Mastercard in global daily transactions in the next year, with significant room still to grow in China’s provincial cities.

While Chinese brands have been quick to move with the changes, the sheer pace of the mobile payments phenomenon in China may cause problems for international brands. Companies now must co-operate with Alibaba and Tencent – which can be opaque – or risk serious sales impact in the country.

Lim believes that the ball is in the court of Western companies: “The million-dollar question is: Will Western firms decide to build a system and compete?” he said.

“The answer is probably yes.”

Data sourced from New York Times; additional content by WARC staff