Six of the biggest banks in China’s megapolis Shanghai are supporting the digital yuan ahead of a May 5th shopping festival. The move represents a direct threat to the country’s top two payment providers – Alipay and WeChat Pay.
The Digital Yuan vs. Alipay and WeChat Pay
According to a Reuters report, some of the leading banks in China are pushing the digital yuan ahead of a shopping festival in the country. Purportedly, they are attempting to persuade merchants and retail clients to download digital wallets so that transactions during the pilot program can happen directly in digital yuan, sidestepping the predominant local payment methods – Ant Group’s Alipay and Tencent’s WeChat Pay.
A bank official, whose identity was not revealed, stated that society should put their trust in e-yuan instead of the traditional payment platforms:
”People will realize that digital yuan payment is so convenient that they don’t have to rely on Alipay or WeChat Pay anymore.”
China’s progress in launching its own digital currency comes as a threat to the dominance of Alipay and WeChat Pay – the two leading payment providers in the country. According to Mu Changchun, director of the People’s Bank of China digital currency research institute, these two corporations account for 98% of the mobile payment market in the most populated country in Asia.
It Is Not a Direct Battle
The banks in question are the Agricultural Bank of China, China’s Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, and others.
PBoC stated that the digital currency will not compete with Alipay or WeChat Pay. According to the bank, it will only serve as a ”backup” or ”redundancy”.
Digital wallets are still in the testing phase. They can be bundled with popular apps, including Meituan, JD.com, Didi, but conspicuously can not be linked to Alipay and WeChat Pay. In other words, the participating banks won’t be able to transfer the e-yuan between their digital wallets and the top two payment platforms.
Wilson Chow, Global TMT Leader at PwC China, commented on the effect that a sovereign digital currency could cause. According to him, e-CNY could digitize ”the last mile” of consumption, enabling banks and merchants to capture data and gain insights into spending patterns.
Chow predicted that e-CNY would account for roughly 10% of China’s electronic payments market in the next few years as it will co-exist with Alipay and WeChat Pay.