My friend Paolo Sironi complained on his recent trip to China that he couldn’t use cash. Either you have Alipay or you are lost. As you can see from the photo below, he wasn’t happy. Apart from the obvious questions about the benefits and drawbacks of a cashless society, I was starting to wonder what would happen, if Alipay filed for bankruptcy? We live in a world where more and more of our financial transactions are not performed in cash or via wire transfer anymore but on shadow payment platforms. Just like the wider shadow banking system performs traditional banking functions outside the regulated banking system, so do shadow payment providers. The basic functions of a payment system are to provide liquidity (funds can be converted to and from cash at any time without delay), reliable transfer of funds from one participant to another, and custody functions (payments are held in custody for short, but often also long time).
The shadow payment system: An ignored risk
The shadow payment system: An ignored risk
The shadow payment system: An ignored risk
My friend Paolo Sironi complained on his recent trip to China that he couldn’t use cash. Either you have Alipay or you are lost. As you can see from the photo below, he wasn’t happy. Apart from the obvious questions about the benefits and drawbacks of a cashless society, I was starting to wonder what would happen, if Alipay filed for bankruptcy? We live in a world where more and more of our financial transactions are not performed in cash or via wire transfer anymore but on shadow payment platforms. Just like the wider shadow banking system performs traditional banking functions outside the regulated banking system, so do shadow payment providers. The basic functions of a payment system are to provide liquidity (funds can be converted to and from cash at any time without delay), reliable transfer of funds from one participant to another, and custody functions (payments are held in custody for short, but often also long time).