Despite the strong growth in the number of bankcards issued by local banks, the economy still has a long way to go in achieving the objectives of a lower cash usage rate and efficient monetary management through the bankcard payment system (Xia, 2000). The achievements, so far, do not look solid when compared to major card using economies.
The percentage of bankcard holders is 5.4% in China, which is far below that of the USA (89%), Canada (97%), Japan (96%) and Germany (96%). In 2000, the Chinese used a bankcard on an average of twice every three months, which was insignificant in comparison to USA's 28.5 times, Canada's 40.5 times and Japan's 7.1 times. There have been a high number of dormant bankcards in the economy (Zhang et al., 2000), and this has also been the case in the twelve cities that were selected as the beachheads for the Golden Card project (Zhong & Wu, 2000). Nine percent of cardholders in these cities used a bankcard once every fortnight, 24% used it two to three times a month, and 67% used it less than once a month or not at all. Overall, the vast majority of debit cardholders used the bankcard as a withdrawal instrument (at the ATMs) rather than as a payment instrument (at the POS terminals).
The degree of use of the ATMs and POS terminals by customers and agents is also an indicator of the level of usage and acceptance of the bankcard and the electronic payment system.
ATMs The Bank of China installed the first ATM in China in 1987. Since then, there has been an increase in the number of ATMs installed by different local banks in the economy (Figure 2 shows the number of ATMs installed in China). Despite the increase in the number of ATMs installed in China since 1987, the scale of ATM installations in China in 1998 was considered to be equivalent to the USA in 1980 and was regarded as at an intermediate stage of development by 1990s standards (Zhang, 1999).
Figure 2: Number of ATMs Installed in China
In 2001, the level of use of ATMs by bankcard holders throughout the country was low, at a national daily average of about five transactions per installed ATM (Liu, 2001). The low level of ATM usage is also a problem in the twelve cities that were selected as beachheads in the experiment phase of the Golden Card project. At the end of 1998, there were 4,500 ATMs installed in these cities through which approximately 80,000 transactions were conducted per day (Zhang, 1999). This means that there were, on average, 18 daily transactions per ATM, which is below the break-even level of operation of 50 daily transactions per ATM in China. The average time interval between each of these transactions conducted in the day in the twelve Chinese cities was 81 minutes, which was far below the 8.6 minutes experienced in the USA. The ATMs in other less prosperous and less busy cities were even more underutilized. For example, the average daily number of withdrawal transactions at an ATM installed by one of the local banks in Guangxi in 1998 was five. In the first three months of 1999, which fell within a festive season when households normally incur high levels of expenditure, the average daily number of withdrawal transactions was only nine per machine (Zhang, 1999). The type of transaction most frequently conducted at the ATMs was discovered, from written-off ATMs (which had reached the end of their useful life span), to be largely withdrawal. The deposit feature of these machines was greatly underutilized (Wang et al., 2000).
POS terminals Although the trend in Figure 3 registers an increase in the installation of POS terminals, there has been low usage and acceptance of the debit card as a payment instrument, by both cardholders and contracted agents.
Figure 3: Number of POS Terminals Installed in China
By the end of June 2000, 400,000 operators from the retail and entertainment sector in the Chinese economy were contracted to accept bankcards issued by different banks. However, this was only 5.4% of all the retail and entertainment operators located in the city areas, despite the 51% annual increase in the number of agents contracted to accept bankcards. A separate study found that retail consumption transacted via bankcard was only 38% of the preexisting credit balance in the escrow accounts of the four major banks in China (Wu, 2001). In fact, the level of use of electronic payment modes by the Chinese for their retail transactions has been low. The value of retail consumption transacted through the electronic payment method was found to be only 3% of the national retail sales value in 2000 compared to 81% in the USA and 64% in Europe. These indicate that the majority still prefers the traditional way of buying and paying in cash for their goods.