Some of China’s biggest state banks are now actively promoting the digital yuan as a superior means of payment to the country’s two leading payment providers WeChat Pay and Alipay. They have launched this campaign as the shopping festival approaches in China.
Reuters revealed in an April 26 report that six of the biggest banks in China are promoting China’s budding central bank-issued digital currency (CBDC) in Shanghai ahead of an online shopping festival scheduled for May 5.
These banks are urging retail outlets and consumers to download the digital wallet and make their payments and purchases using the CBDC or e-CNY. That would bypass the current payment strategies of choice for the millions of shoppers; Tencent’s WeChat Pay and Ant Group’s Alipay.
This report also noted that one bank official appointed to CBDC trial’s rollout in Shanghai under the guidance of the People’s Bank of China mainly described the digital currency as superior to WeChat Pay and Alipay. The official said:
“People will realize that digital yuan payment is so convenient that I don’t have to rely on Alipay or WeChat Pay anymore.”
While speaking at an online panel discussion in late March, Mu Changchun, the head of the PBoC’s digital currency research institute, said that WeChat and Alipay account for around 98% of the mobile payment market in China. According to him, this dominance poses risks to the domestic financial system in case they experience any issues.
China Wants To Back Up Other Digital Payments Methods
Changchun said that the central bank does not intend to compete directly with WeChat Pay and Alipay. Instead, it is meant to act as a backup to guarantee financial stability in the scenario that something happens to the other service providers.
Nevertheless, the state has also been increasing its efforts to limit the tech giant dominance within its jurisdiction and clamp down on the anti-competitive behavior in the internet space. In early April, the government hit Alibaba with a record fine of a staggering $2.8 billion for monopolistic practices according to a report by CNN.
For now, the rollout of China’s digital yuan will enable the central government to gain some control over a share of the major troves of financial data that are getting hoarded by the nation’s top payment providers. One banking official tasked with promoting the digital yuan told Reuters:
“Big data is wealth. Whoever owns data thrives. WeChat Pay and Alipay own an ocean of data.”
Academic Martin Chorzempa, while commenting during the Consensus conference in May 2021, said that it is ‘difficult’ for Chinese financial regulators to compel the nation’s top payments companies to hand over the collected data about their customers. He added:
“[China’s CBDC] could potentially allow that central bank to get a lot more access to payment data and also to gain back some power from these companies.”
These top banks in the CBDC pilot schemes comprise the nation’s biggest lenders, including Agricultural Bank of China, China Construction Bank, The Industrial and Commercial Bank of China, HSBC, and Bank of China. China reportedly completed its first cross-border pilot of the CBDC with Hong Kong on April 1.
