The banks will also benefit from the digital yuan, because consumers and merchants can make direct transactions using their e-CNY accounts at the banks without the need of going through a payment service provider.
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However, they no longer offer free payment acceptance or withdrawals, which has caused some grumbling among its user base. Adding up the transaction fees and withdrawal fees, this cost is very high if they use third-party payment services,” said Sun.Īlipay and WeChat Pay both gained popularity quickly by charging no fees in their early days. The thing is, many merchants get millions of yuan or tens of millions of yuan of payments in a year. “This is particularly appealing to the merchants. Merchants are charged no fees for accepting the digital yuan, based on merchants’ experience in the Shenzhen trial, she said. In terms of reliability and credibility, the digital yuan has far surpassed third-party payment service providers,” Sun said. “The digital yuan is inclusive and bank-agnostic – anybody can open a digital yuan account without verifying their identity or linking their bank account… It is endorsed by the central bank’s credit, and managed centrally.
Meanwhile, Sun Yang, an analyst from Suning Institute of Finance, expects that third-party payment services like Alipay and WeChat Pay will “fade like yesterday’s flowers” because the digital yuan is not only “more advanced” but also comes with “the state’s will”. A sub-tier of banks and private-payment service providers – such as Alipay and WeChat Pay – are likely to be authorised to provide services facilitating digital yuan circulation.
It is the digital equivalent of current banknotes and coins, and a controllable anonymous payment tool.Īccording to Fitch research, PBoC has designed a two-tier system for digital yuan under which designated commercial banks may open digital wallets and convert currencies to and from digital yuan for customers.
The digital yuan is a legal digital currency that has been issued by the People’s Bank of China (PBoC) in pilot schemes across the country. “Wider adoption of the central bank digital currency could lead to changes in data sharing and competition… In the longer term, this could lead to changes to the revenue structure of Alipay and Weixin Pay (or WeChat Pay), which dominate non-bank mobile-based payments,” said Fitch Ratings. Used via mobile phones, they have become so ubiquitous it is estimated that 2 trillion yuan in payments were made via the two systems in 2020, as going out without a wallet is now common practice in the country.
The central bank digital currency (CBDC), if adopted widely, will enable banks to obtain transaction data and consumer insight like never before, and compete with Ant Group’s Alipay and Tencent’s WeChat Pay, analysts from Fitch Ratings said.Īlipay and WeChat Pay are the two mainstream digital payment systems in China with a combined 90% market share. It remains to be seen if Chinese central bank’s rollout of the digital yuan will be frictionless. (AF) The digital yuan, China’s fiat digital currency endorsed by the central bank, is set to dethrone Alipay and WeChat Pay and push commercial banks to transform their businesses, say analysts.īut while merchants may find the “zero fee” feature of the digital yuan particularly appealing, many Chinese consumers who have already ditched physical wallets have shrugged with indifference.
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Alipay and WeChat Pay could ‘fade like yesterday’s flowers’ as the Chinese government rolls out its CBDC payments infrastructure for free to merchants
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