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ATMs and payment systems in China

McKinsey recently released an article on the prospect of SMS-based payment (1) system (2) in China rural area. The (3) arguments were (4) China has (5) the low non-cash payment when compared to other countries. The Chinese government is keen to develop non-cash (6) payment in order to stimulate rural spending. There are both economical and political reasons for an efficient rural payment system.

I agree with the (7) article that ATM and POS (8) is not the right product for Chinese farmers. The main reason is cost. While (9) annual income of (9) average farmer in China is below USD 2000, it is relatively costly to acquire and maintain an ATM or POS, which usually costs more than USD 20000.

(10) Apart from cost, it is also a trend in other countries where ATM adoption is decreasing. (11) From the BIS statistics, (9) number of automated banking machines per million inhabitants declined to 1123 in 2000 and 1069 in 2005.

However, the picture portrayed by McKinsey seems to be (12) a distant future. (13) From China Union Pay website there are 86000 ATM and 608000 POS installed. In 2005 alone, the transaction volume (14) is over 5 billion RMB (USD 670 M). (15) But, there are only 14 cities in China enabled with mobile payment and with only 2.7 million users.

One major type of money flow in rural China areas is (9) money transfers from workers in urban cities. Urban cities, like ShangHai and ShenZhen, attract millions of farmer to work there. Their wages are usually "carried or transferred" back to the villages. This type of transaction is (9) root (16) for many rural payments. So, the critical success factor may not be in the payments in rural areas, but in the root of most payments, which are in the cities.


(1) Correction: Change "system" to "systems."
(2) Suggestion only: Change "in China rural area" to "for rural area of China."
(3) Suggestion only: Change "arguments were" to "article indicated."
(4) Correction: Insert "that."
(5) Correction: Use "China has lower non-cash payment than other countries."
(6) Correction: Change "payment" to "payments."
(7) Suggestion only: Change "article" to "article's contention."
(8) Correction: Change "is" to "are" and "product" to "products."
(9) Correction: Insert "the."
(10) Suggestion only: Change "Apart from cost, it is also a trend in other countries where ATM adoption is decreasing" to the following: "Apart from cost, there is also a trend of declining ATM adoption in other countries."
(11) Suggestion only: Change "From" to "According to."
(12) Correction: Insert "of" and change "a" to "the."
(13) Suggestion only: Change the sentence to "The China Union Pay website states that there are 86000 ATM and 608000 POS installations."
(14) Correction: Change "is over 5 billion" to "exceeded five 5 billion."
(15) Correction: "but" is a conjunction and used to join phrases or clauses. It is never used to begin a sentence. Instead, use however, nevertheless, although, on the other hand, nonetheless, etc., to begin the sentence.
(16) Suggestion only: Use "of" instead of "for."

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