How You Could Grab a Slice of the US$12.8 Trillion Pie

If you ever want to experience a culture shock, go to Japan.

Japanese culture is full of honesty, respect and a good deal of honour. Mixed in however, is also a whole lot of shame.

Japanese, generally, are afraid of making mistakes. They don’t want to be different from the majority. It also doesn’t help that throughout history their culture has gone to great lengths to avoid shame.

Back in the Samurai era, death was a possible result if enough shame built up.

It’s why Japan doesn’t want to talk about the Second World War. It’s why Japanese businesses buy negatively yielding government bonds. They don’t want the state to fail. But it means they’re essentially paying the government to spend their money.

Another strange cultural norm is Japan’s love of cash.

Japan may love cash, but China doesn’t

Among developed nations, Japan has the most cash circulating their economy by far. As a percentage of gross domestic product (GDP), the Yen reaches almost 20%.

Cash to GDP ratio 3-05-18

Source: Equity Master

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There are a couple of reasons why this has happened. Japanese aren’t that eager to hand over personal information, online or via credit card. There is also a huge number of ATMs in Japan. That makes it easy to grab cash on the go anywhere you are.

But if cash is so popular in Japan, why does the nation also love bitcoin? You might think bitcoin is the antithesis of cash. Yet Japan is one of the biggest supporters of the digital currency.

Japan Inc. wrote early this year:

There is no doubt that Japan is one of the leading bitcoin nations right now. Indeed, on some days up to 60% of all the trades carried out on the planet originate here.

Yet just across the East China Sea, you’ll find the exact opposite playing out. China (the government at least) hates bitcoin, and China’s society is almost cashless. Because of this, the country has leapfrogged the US and many other developed nations when it comes to payment technology.

A market worth trillions

26 year old Xia Yue lives in Beijing. When she leaves home, she doesn’t take a wallet full of cards and cash. She leave home with her smartphone and house key.

Next year, she probably won’t even take the key.

Millions of people across China are doing the same. They take their smartphone and not much else. That’s because the payment preference in China isn’t cash or credit card. It’s smartphone payments.

According to the Asia Times:

China’s mobile payments in 2017 totalled 81 trillion yuan, or US$12.77 trillion, as of October according to a report from the Xinhua news agency this week.

The volume crushed the total for the whole of 2016, which came in at 58.8 trillion yuan, according to data from the Ministry of Industry and Information Technology.

China’s transformation into a cashless society is a development that could unleash tremendous potential energy in China’s economy.

This is not just an online phenomenon. Millions of Chinese also prefer to pay with their mobile in-store. What’s caused this love for mobile payments, both online and off?

Unlike us Westerners who love credit cards, China didn’t get their first credit cards until 1985. A Goldman Sachs report shows that each Chinese person had 3.6 debit cards on average. But only a third had a credit card. 

And it’s the lack of credit card infrastructure which has allowed China to leapfrog us here in the West. Less developed countries like China had ‘minimal obstacles preventing the implementation and adoption of a superior system,’ Author David Wolman writes.

That superior system is mobile payments.

Cashing in on a cashless China

Chinese spending habits are even affecting us here down under. You’re probably well aware Australia is one of the hottest tourist destinations.

The fastest growing segment of which is Chinese tourists, by far. And because they want to pay with their smartphones, Aussie businesses see an opportunity to offer such payment methods.

Because of China’s consumer power, it’s likely we’ll be forever playing payment catch up. If the Chinese have a preference to pay with their smartphone, then by gosh we’re going to let them.

Not only is this encouraging Aussie business to develop payment technology, China’s fintech (financial technology) industry is arguably the world’s best.

According to eMarketer, almost 80% of Chinese smartphone users will be tapping, scanning or swiping their device at the point of sale in the years ahead. Compare that to just 23% of US smartphone users who will be doing the same.

I’m sure you’ve caught onto the opportunity here. Investing in the companies on the ground, developing technology, could create enormous returns in the months and years ahead.

In my brand new advisory service, Wealth Eruption, we’re looking for exactly these opportunities — trends and shifts that should cause business earnings and stock prices to erupt.

Of course you’ve got to get behind the right businesses with huge potential. As of writing I’ve already identified two ASX listed stocks profiting from China’s massive mobile payments market. One in particular has the potential to climb as high as 2,880%.

To find out these names, click here.


Härje Ronngard,
Editor, Money Morning

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

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