WHY THIS MATTERS IN BRIEF
Future national currencies will be digital, and China is in the lead to create one …
Love the Exponential Future? Join our XPotential Community, future proof yourself with courses from XPotential University, read about exponential tech and trends, connect, watch a keynote, or browse my blog.
It’s been announced that Tencent owned WeChat, China’s largest messaging app and one of the country’s biggest payment services, will begin supporting the country’s brand new sovereign digital currency in the coming weeks.
While other countries like the EU, France, the UK and US, as well as others like Sweden, debate and discuss the benefits of a so called Central Bank Digital Currency (CBDC) China has been building and testing one. In fact they’ve been working on the so called digital yuan since 2014 and running trials across the country, and now the move by WeChat, which has over 1 billion users, could give the new currency a huge boost as people begin to actually start using it to buy stuff.
WeChat may not be that well know to users outside of China but inside the world’s second largest economy it is dominant and ubiquitous. It’s often dubbed a “super app” because many services are wrapped into it. People can use messaging functions and make payments via WeChat Pay, but also hail taxis, order food, and use it to buy all manner of other products and services.
WeChat Pay works simply by letting users show merchants a barcode on their phone to pay for items in store. It can also be used for purchases online, and WeChat Pay has at least over 800 million monthly active users.
To date the People’s Bank of China (PBOC), which issues the digital yuan or e-CNY, has done limited trials in certain cities via lotteries where the central bank has handed out small amounts of the currency to some citizens.
But there are now signs that the PBOC is looking to expand usage of the digital yuan, despite no concrete date for a nationwide rollout. This week, the PBOC launched a new e-CNY app for users in certain regions and cities in China. That will enable anyone in those areas to download and sign up to use the digital currency. Previously, users could get the app on an invite-only basis.
In China, WeChat and Alipay, which is run by Alibaba affiliate Ant Group, dominate mobile payments; last year, Alipay also began trialling digital yuan payments. But WeChat and Alipay are also potential competitors to the digital yuan’s own app.
Now, with WeChat planning to roll the e-CNY out and Alipay on board too, the PBOC will have more chance of getting citizens to use the digital currency.
“Chinese consumers are so locked in WeChat Pay and Alipay, it’s not realistic to convince them to switch to a new mobile payment app. So it makes sense for the central bank to team up with WeChat Pay and Alipay as opposed to doing it on its own,” said Linghao Bao, analyst at consultancy Trivium China.
The potential expansion of e-CNY usage also comes ahead of the Beijing Winter Olympics this year and the PBOC have been working hard to try to get it up and running before then.
