The central bank will distribute it to the population via financial institutions.īut once users take funds out of their accounts to top up their wallets, banks will lose track of the money – much like cash withdrawn from ATM machines. Once the payment QR code becomes a commodity, the wallet market will open up to new players.It’s unlikely that eCNY will become a serious rival to Big Tech overnight: The digital yuan is supposed to co-exist with private payment options, not wipe them out.īut if it does take off, China’s data economy might see a recast.Ĭhalk it up to what Columbia University economist Shang-Jin Wei terms as the currency’s “controlled anonymity.” The prize lies in gleaning insights into customer behaviour to score users’ creditworthiness and extend them loans. The central bank’s liabilities, which have practically vanished from retail use, will make a comeback: Except they’ll return in electronic form, not as physical cash.Īnt and Tencent will have to work hard to retain customer loyalty, or they could lose their stranglehold on data. This will make the digital yuan universal legal tender in China. Therefore, the PBoC will ensure that merchants display a single QR to all customers, one that by default accepts eCNY.Īlipay, WeChat Pay and UnionPay wallets will have to accommodate the code to avoid rejection. Still, smart money is of no use if people don’t also find it easy to spend. In uncertain transactions like paying for under-construction homes, money with built-in rules could help establish trust between the buyer and the seller. Pilots to promote the new instrument are both expanding and becoming more sophisticated: With smart contracts, or self-executing computer code, consumers can pay a business in advance, but eCNY will only be released by their wallets when they receive the goods or services. Not knowing which app the customer would use, merchants had to be ready to offer both the QRs, as well as one from China UnionPay Co, the state-owned payment processor for banks.Īfter the central bank recommended in August 2019 that the codes become interoperable, Tencent and UnionPay decided to allow each other’s customers access to their walled gardens.įan’s comments suggest that the tech industry’s lock may weaken further.īeijing will push for a unified QR code because it wants to give a leg-up to the digital yuan, or eCNY, a paperless version of the fiat currency issued by the central bank. Other countries enthusiastically copied the model that was made wildly popular, starting in 2013, by Ant Group Co’s Alipay and Tencent Holdings Ltd’s WeChat Pay, the two tech giants controlling more than 90% of the mobile-payment market between them.īut authorities in Beijing didn’t like the idea that funds – and the highly valuable customer data that came with them – flowed in two large, private closed loops. The same dotted squares could now start to undermine their moat.įan Yifei, a deputy governor of the People’s Bank of China (PBoC), said at a recent forum on digital finance that it was necessary to standardise, among other things, the two-dimensional barcodes so that “merchants can support various payment tools without increasing costs.”īefore the pandemic, QR codes had spawned a 9.5 trillion yuan (US$1.4 trillion or RM6.34 trillion) industry for settling bills in China. ALIPAY and WeChat Pay’s dominance of China’s retail payments was scripted over the past decade on the back of the humble quick recognition code.
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