Six leading Chinese banks are promoting the digital yuan as a better alternative to existing major payment providers WeChat Pay and Alipay, ahead of an upcoming shopping festival.
Banks Push for Digital Yuan Usage for Shopping Festival
According to Reuters on Monday (April 26, 2021), China’s major state-owned banks are pushing the use of the digital yuan for a shopping festival coming up on May 5 in Shanghai. The report noted that these banks are urging retail clients and merchants to download the digital wallet to enable purchases with the CBDC, which would bypass WeChat Pay and Alipay.
Some of the major banks involved in the digital yuan pilot scheme include the Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China (ABC) and China Construction Bank.
In order to attract spenders to the digital yuan, the People’s Bank of China (PBOC) could distribute free red envelopes or give discounts to Shanghai residents to use for purchase during the shopping festival.
A bank official who is involved with the Shanghai trial of the e-CNY said that the digital yuan was a better alternative compared to Alipay and WeChat Pay. According to the anonymous official:
“People will realise that digital yuan payment is so convenient that I don’t have to rely on Alipay or WeChat Pay anymore.”
China Working to Lessen Alipay and Wechat Pay’s Dominance
Alibaba’s Alipay and Tencent’s WeChat Pay maintain a duopoly in China’s mobile payment sector, controlling over 90 percent of the market. Meanwhile, Beijing has been reportedly seeking to water down the dominance of the payment giants.
Back in November 2020, Chinese regulators stopped Ant Group’s initial public offering (IPO), which would have been the world’s largest IPO. In March 2021, Tencent along with other major tech companies were fined for failing to disclose their acquisitions. Earlier this April, Alibaba was slammed with a $2.8 billion antitrust fine.
However back in October 2020, PBOC’s director-general of the digital currency institute, Mu Changchun, said that the digital yuan would not challenge Alipay and WeChat Pay, rather, the e-CNY would work with the two major payment platforms.
Meanwhile, as reported by BTCManager in March, Mu Changchun said that the duopoly held by Alipay and WeChat Pay posed a financial risk, should the online payments giants encounter a problem. However, the PBOC official stated that China’s CBDC project would act as a backup and ensure financial stability if both platforms have any issues.
According to the Global TMT Leader, PwC China, Wilson Chow, it would take a while for the digital yuan to see mass adoption. Chow speculated that in a few years, China’s CBDC would hold 10 percent of the country’s mobile payments market, existing alongside WeChat Pay and Alipay.