Episode Description

China boasts the largest FinTech ecosystem in the world having a penetration rate of 87%  and a total transaction volume of $51.8 trillion via mobile payments only (three times the country’s GDP). The country is setting strong examples for the rest of the world to follow as it continues to develop cashless innovation systems positing road maps and processes for a shared digital currency future. 

The largely cashless economy is fundamentally changing the very nature of money as it emerges as the world's financial technology leader.

How are they doing that?

For an exclusive episode unpacking the FinTech infrastructure of China and its growing dominance in the world of tech-driven financial services, we sat down with one of the leading experts in FinTech and Innovations, Rich Turrin.(@richardturrin) Rich is the author of the best-selling books Cashless: China's Digital Currency Revolution (https://www.amazon.com/Cashless-Chinas-Digital-Currency-Revolution/dp/1949642720) and Innovation Lab Excellence. (https://www.amazon.com/Innovation-Lab-Excellence-Digital-Transformation-ebook/dp/B07PMF4YFL) He is an award-winning fintech innovation expert previously heading fintech teams at IBM, following a twenty-year career heading trading teams at global investment banks where he spent a large part of his career in Shanghai witnessing China's cashless revolution upfront.

In the episode we deep-dive into:

-the design and innovation processes that set up the Chinese FinTech infrastructure

-the core reasons behind the massive adaptation of cashless payment systems in China

-how the country incentivized its private tech firms to develop and encourage large scale FinTech solutions by provisioning banking licenses for them

- comparison of NFC payment systems (Square, ApplePay, etc) vs Chinese payment rails (like Alipay)

- QR codes as a tool for widespread fintech adoption in China

-how China's central bank digital currency (CBDC) can transform and replace standard payment systems like SWIFT

-how CBDC differs from ETH/BTC

-how and why the west is falling behind when it comes to fintech

-the rise of CBDCs and policy implications for the Emerging Market countries

Follow our host Waheed Rahman (@iwaheedo) for more updates on tech, civilizational growth, progress studies, and emerging markets.

 Here are the timestamps for the episode. On some podcast players, you should be able to click the timestamp for the episode.

(00:00) - Intro

(03:22) - Rich's journey to writing "Cashless: China's Digital Currency Revolution

(05:17) - Key differences between the Chinese society and the American society

(07:51) - Why has the West fallen behind in terms of major fintech adaption vs China?

(11:17) - What is the reason behind the rapid FinTech adoption in China? What makes the Chinese FinTech so special?

(15:56) - What is Central Bank Digital Currency (CBDC)? Why should we care about it?

(21:28) - Emergence of the early cashless payment systems (QR codes, NFC, etc.)

(27:36) - Advantages of having CBDCs compared to the contemporary FinTech payment solutions (Ali Pay, WeChat pay, Apple pay, etc.)

(34:48) - Crypto maximalist viewpoint vs CBDC

(36:00) - Disadvantages to having CBDC

(38:58) - How would CBDCs change/replace the current money transfer system platform such as SWIFT?

(50:36) - Impacts on western policies 

(53:24) - When will CBDCs get launched? What stage is it in right now?

(56:03) - How is China breaking the tech industry?

(59:42) - How should policymakers in Emerging/Frontier markets think about CBDCs?

 Music used in this episode: Reverie Millenary | by PoKeR、李大白k

(A tune inspired by one of the most famed female figures of ancient China, Empress Wu Zetian. it tells the story of an educated young lady employed in the palace for her academic talents. Through a variety of circumstances and political struggles, she eventually found her way up to the top as the Emperor of Tang Dynasty China, where her talents ushered the ancient kingdom into a golden era of economic momentum.)


China has one of the world's most robust FinTech ecosystems.
The economy is largely cashless = 87% penetration rate. 📈
What've they been doing differently vs the West?
What are their plans for Fintech dominance?

Firstly, historically China has been no alien to innovations in money.

-The first manufactured metal coins started appearing from China and Aegian Sea from 700 BC

-The first paper money was invented in Song dynasty China during the 1100 AD.


-China relies on its V 1.0 digital payment systems: namely Alipay &  WechatPay

-They are the world’s 1st national payment systems to achieve country-wide adoption, resulting in a nearly cashless society(87% penetration rate vs 46% for US).

What is the difference between China vs West payment systems?

 -The west (US fin. market at the center of the 🌎) switched from cash to credit cards

 -🇨🇳 on other hand: Heavily focused on being mobile-first. 83% (& increasing) of all payments made via mobile payment modes 

The other thing: China’s FinTech infra is a unified ecosystem of payment via super apps

-Its a full range of services that you can use your digital payment on.

(e.g you think Apple Pay to buy coffee but not get insurance, not so for China)

What has been China’s secret sauce?

- Doling out banking licenses to private tech companies Alipay WechatPay for their V1.0 payment systems.(i.e you can’t imagine @Google having banking licenses in the West)

- Usage of QR codes (vs the expensive NFC payment systems like @square in the West).

QR codes, Alipay WechatPay  vs NFC (used in West)

-QR code payment, Alipay, etc. processed instantly (negligible transaction fee)

-NFC payment - involves waiting time for the virtual data to be transmitted to and from the payment terminal + more expensive.

For Version2.0 Payments, China’s working on their own Central Bank Digital currency (CBDC)


-digital currency issued by the central bank

-built on crypto tech (but not similar)

Fundamentally changes the nature of money you're used to

-€1 or ¥1 of CBDC = 1 unit of the currency

FYI: CBDC are not the same as cryptocurrencies

-Cryptocurrency like BTC/ ETH/USDT function as a medium of exchange and exist ONLY on digital ledger.

-Cryptocurrency act as independent assets or store of value.

-CBDCs are digital version of fiat currency.

-China’s CBDCs are not on a blockchain.

Now question: Why did China not use blockchain?

-Transaction speed.

-Blockchain is best for cryptos with limited distribution but inapt for a mass-market currency.

-Imagine 1.4bn of 🇨🇳's population need to make a digital payment at the same time.

-CBDC provides massive throughput enabling faster transaction/second.

This contradicts crypto maximalist viewpoints

-But, how long should you wait till the full roll out of cryptos (when the whole world abandons fiat currencies) ?

Our guest @richardturrin thinks CBDCs are a temporary stop gap tech before decentralized crypto catches up.

But why is China working on a CBDC?

-Faster process. (as simple as sending email, true P2P)

-Decrease reliance on SWIFT. (holds the right to block transactions)

China will leverage it’s world’s largest exporter position to demand payments in digital Reminbi.

What are the benefits of CBDC?

-Disintermediation: Instant P2P transfer of money.(without having to rely on intermediaries like Alipay WechatPay Mastercard etc. & banks)

-Financial inclusion.(for the unbanked)

-Financial stability. (can be used for tweaking monetary policies)

What are the downsides of CBDCs?

-Privacy issues from not being completely decentralized.

As governments would still need to tax money.

What should policymakers from emerging markets think about China’s CBDC play?

CBDCs would allow massive level financial inclusion.

-Real correlation between financial inclusion and increase in GDP.

- If your a small country, the upside of adopting CBDC is high. (not so if you’re US or EU and already have a dominant currency)