China’s largest banks actively promote digital Yuan as a superior payment method to the country’s two leading payment providers, WeChat Pay and Alipay. In an April 26 report, Reuters disclosed that six of China’s biggest banks support China’s nascent CBDC in Shanghai before an online shopping festival on May 5. The support for CBDC, also recognized as the Digital Yuan (e-CNY) by the banks, is a political mandate. According to a Reuters report, it is an alternative to Ant Group’s Alipay and Tencent’s WeChat Pay in China’s payment ecosystem.
Moreover, the banks asked the retail outlets and customers to download the digital wallet and buy products employing the CBDC. In an attempt to fight the dominance of the two fintech giants, the report opined the e-Yuan might be delivered free to citizens or come with a massive discount that will boost their sales. Various stakeholders predict the probability of the digital Yuan being extensively employed over China, indicating its excellent security features.
Alipay and WeChat Pay Account for 98% of the Mobile Payment Network in China
The head of PBoC’s digital currency research institute, Mu Changchun, talked about the fintech giants at an online panel discussion in late March. Mu Changchun opined that Alipay and WeChat Pay account for 98% of the mobile payment market in China. Thus, posing dangers to the domestic financial system should they encounter any problems. Additionally, Changchun elucidated that the central bank does not plan to fight Alipay and WeChat Pay directly. However, it performs as a backup to assure financial stability if something happens.
Nevertheless, the state has also been expanding efforts to reduce giant tech dominance and stop anticompetitive behavior in the internet sector. According to CNN, in early April, the government slapped Alibaba with a record fine of $2.8 billion for monopolistic practices. The launch of China’s digital Yuan will enable the central government to control a share of the vast troves of financial data that the country’s top payment providers are accumulating.
Last year, the PBoC had led pilot tests in major cities like Bejing and Shenzhen, where it offered over $1.5 million worth of digital currency to Shenzhen citizens. The plan was to trial the retail capabilities of the CBDC, and the registered May 5 shopping festival may be an expansion of the broader pilot tests created for the Digital Yuan.
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