This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Consumers overall use of cash, certainly the US has declined steadily in recent years of digital options like Venmo and Apple Pay compete with credit cards and now offer contact less payment. Look around the globe to a place like China, and that is especially the case and has been for a long time. Yeah,
very pleased to have with us this afternoon. Martin Towards Zampa, Senior Fellow at the Peterson Institute for International Economics, also the author of the new book The cash Less Revolution, China's reinvention of Money in the end of America's domination of finance and technology. I want to start with a little anecdote from a trip that I had to China
back in Carol and Martin. I remember I was there with classmates from graduate school, and there were some classmates who had trouble buying something because they didn't actually have the whechat app and the store that they were going to in the mall didn't accept credit cards and didn't accept cash. Martin, and I'm talking here this is five years ago. They were already cash less in this and fire mall in Shanghai. Yeah, the this, this has really
occurred in an incredibly fast way in China. I moved to China to live in Beijing and research its financial system, and everything back then was quite backwards. You had to go through this state owned banks, there were limited investment options,
very limited capability to get loans. And then once the big tech companies were invited into disrupt payments, this whole edifice of financial repression and backwardness went away and almost a blink of an eye, and I was really there on the ground watching how it transformed daily life in China as cash pretty much disappeared and foreigners used to cards were essentially second class citizens if you didn't have
these apps. But also elderly people, the poor can be left behind when you when cash just disappears so quickly and you move into this convenience, you forget that there are drawbacks too. Why was it was China so right for them to become a cash of society. Well, the financial repression that exists did up until around meant that everything was so backward that digital payments were a massive improvement on it. And if you compare that to the
United States. Generally credit cards work for the vast majority of people, and that's already really a digital payments method already, So it was just right for a revolution. The only thing that was missing was a political opening that would allow brave entrepreneurs to take a real risk and to disrupt the system. And that's what occurred around the Party recognized that ordering the banks to modernize was not going
to get them what they needed. Instead, they needed to bring in big tech companies that could use technology in a new way to update their financial system and hopefully provide an engine for growth for them going into the future.
So I'm wondering how the US looks to this, And again I go back years ago Martin and the idea of UM when when Facebook Messenger was spun off of Facebook's main app, the guy who ran at David Marcus, was coming from PayPal and he said, what I want to create here is the you know US version of we chat. U is the US close at all to what China is doing when it comes to revolutionizing payments because that didn't turn out for Messenger and markets by
the way, is no longer at Facebook or metal platforms. Yeah, so so what's really interesting in this in this book is that you can see the flow of ideas reversing. Initially, these companies in China are copying PayPal, they're copying eBay and other players in the US market. And then what happens around fourteen is that there's real frontier innovation going
on in China that is not happening here. You would need dozens of apps in the United States to approximate what you can do with one of the super apps in China. Think borrowing money, booking travel, paying for something, buying things online, getting a taxi. Just about anything you could want to do in your daily life you can do on these apps. And really Silicon Valley has not discovered were the killer app that's allowed them to create
this kind of fundamental innovation. And we essentially pay the same way that we always have, and even if we pay with phones, a lot of the underlying infrastructure behind that is the same card infrastructure that we've been using for a long time. All right, so what does this mean?
You know, it's interesting how we talked so much about the US dollar, the dominance, the strength of it, what it's been, you know, the impact on the global world in this current macro environment, how does something like the cashless revolution maybe diminish the respect that the US dollar
has garnered for for so long. What's really interesting is that despite the incredible strength and revolutionary capability that china sintech firms have had in China, they've had relatively limited sex sex abroad at disrupting the current dominance of US
financial firms. So just about anywhere in the world. I was in a pharmacy earlier today and in Washington, d C. And they accept Ali pay um even though a few Chinese people are visiting these days, but very few foreigners actually use Ali pay That includes Americans, that includes braziliance. Everywhere that this has been tried, it hasn't really succeeded yet.
And that means that the US still retains a lot of dominance because the pipes that carry the dollars advantages tend to be bigger bank based systems that China's has a difficult time disrupting um. And and at the same time, my message for the US is that you really can't
be complacent. We have to keep making sure that you know cross border payments, especially where the dollar dominates become a lot more convenient, easier, because right now there are a lot of problems in that space and improvement it's not really going very quickly, and that opens an opportunity for China to disrupt us in the way that fintech companies have disrupted the state banks in China could actually happen given the reticence around a company like bite Dance,
the parent company of TikTok, and even the way that it's just garnered. So many lawmakers attention over concerns about Chinese control, like would would lawmakers ever allow that to happen when it comes to the financial sector here in the US. I don't think they would, and that's why the disruption is unlikely to come in for a battle for your wallet in the United States because the US
would ban it. But the ideas of the Chinese syntech revolution are spreading around the world, and a lot of countries that are not the US are open to more ways of paying and really don't like necessarily the way that the US has a stranglehold on the global financial system through the dollar. They might like an alternative, even if it has some more controls on it. Because China doesn't allow the RIM and B to be freely usable,
even if there's some sort of programmability. You know, if China launches a central bank digital currency, and you know this is a tall order, but if it interacts better with new digital currencies that other countries and around the world launch, then the US could potentially be in a situation where where you know, we're analog in a sense, and the rest of the world is operating on some new kind of system, and that research allows trying to to come in and shape standards in that space in
a way that we might not be ready for well. And it is interesting when you look at like the emerging markets overall, um, you know how they have been adopting in many ways financial innovation UM much more quickly and more readily because they don't have the financial infrastructure that the developed world has. UM. So some really interesting food for thought, UM, Martin, thank you really appreciated Martin Trezempa. He's senior fellow at the Peterson Institute for International Economics.
His book The Cashless Revolution, China's reinvention of Money and the End of America's domination of finance and technology