Some of China’s largest state banks are actively promoting the digital yuan as a superior means of payment to the country’s two leading payment providers, Alipay and WeChat Pay.
In an April 26 report, Reuters revealed that six of China’s largest banks are promoting China’s nascent central bank-issued digital currency, or CBDC, in Shanghai ahead of an online shopping festival on May 5.
The banks are urging retail outlets and consumers to download the digital wallet and make purchases using the CBDC, or e-CNY. This would bypass the current payment methods of choice for millions of shoppers – Ant Group’s Alipay and Tencent’s WeChat Pay.
The report noted that one bank official appointed to CBDC trial’s rollout in Shanghai under the guidance of the People’s Bank of China specifically described the digital currency as superior to Alipay and WeChat Pay, who stated:
“People will realise that digital yuan payment is so convenient that I don’t have to rely on Alipay or WeChat Pay anymore.”
Speaking at an online panel discussion in late March, the head of the PBoC’s digital currency research institute, Mu Changchun, stated that Alipay and WeChat Pay account for 98% of the mobile payment market in China, posing risks to the domestic financial system should they experience any issues.
Changchun noted the central bank does not intend to compete directly with Alipay and WeChat Pay, but acts as a backup to “ensure financial stability in case something happens” to them.
However, the state has also been increasing efforts to curtail tech giant dominance and clamp down on anticompetitive behavior in the internet sector. In early April, the government hit Alibaba with a record fine of $2.8 billion for monopolistic practices according to CNN.
The rollout of China’s digital yuan will allow the central government to gain control over a share of the massive troves of financial data that are being hoarded by the country’s top payment providers.
“Big data is wealth. Whoever owns data thrives,” another banking official tasked with promoting the CBDC told Reuters, adding: “WeChat Pay and Alipay own an ocean of data,”
Commenting during the Consensus conference in May 2020, academic Martin Chorzempa stated it is “difficult” for Chinese financial regulators to compel the country’s top payments firms to hand over the data they have collected on their customers. “[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,” he added.
The six banks in the CBDC pilot schemes comprise the country’s largest lenders, including The Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, HSBC, and China Construction Bank.
On April 1, China completed its first cross-border pilot of the digital yuan with Hong Kong.