Beijing signals Digital Yuan will integrate with existing payment schemes
It needs to, because the likes of Alipay are already ubiquitous – and already used overseas
China appears to have begun to address one of the big unanswered questions about its central bank digital currency: how to get people using it, given rival electronic payment schemes are already ubiquitous.
Beijing has slowly rolled out its Digital Yuan over the last couple of years, giving it away to promote uptake and persuading millions of merchants to accept the currency.
But existing payment systems already do huge amounts of business in China, where up to 80 percent of transactions are already conducted using mobile payment schemes. Alibaba's AliPay and Tencent's WeChat Pay dominate the market, each handling over 100 million transactions daily – with potential for more. Both companies boast over 500 million monthly active users and more than a billion signed-up customers.
Millions of merchants are signed up for those schemes, both of which have become utterly ingrained in everyday life.
Beijing's digital currency therefore has deeply entrenched competition, and a user population for whom change will be an inconvenience.
Which is what makes a speech delivered last week by Fan Yifei, a deputy governor of the People's Bank of China, so interesting.
According to an account of the meeting in state-controlled media, Fan said standardization across payment systems will be needed to ensure the success of the Digital Yuan.
The kind of standardization he envisioned is interoperability between existing payment systems – whether they use QR codes, NFC or Bluetooth.
That's an offer AliPay and WeChat Pay can't refuse, unless they want Beijing to flex its regulatory muscles and compel them to do it.
A hint: they don't want to see those muscles even begin to tense, because the consequences could be terrifying.
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Fan's remarks will also have pricked up ears further afield, because AliPay and WeChat Pay are already usable outside China. One of Beijing's ambitions for its Digital Yuan is to have it challenge the US Dollar's dominant role for conducting cross-border payments.
With millions of payment terminals outside China already set up for AliPay and WeChat Pay, and the prospect of the Digital Yuan being accepted in the very same devices, Beijing has the beginnings of a global presence for its digital currency.
That possibility will not have gone unnoticed among the world's central banks and financial regulators. ®