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PBoC to Link e-CNY with Other Payment Tools via QR Code

The People’s Bank of China (PBoC) is working to promote interconnection between the digital yuan (e-CNY) and other electronic tools to enable payments by QR code scanning, its deputy governor has said.

Fan Yiwei said at a digital finance forum last week that linking the digital identity, message specification and QR code systems is part of their efforts to accelerate the standardization of the e-CNY system. Despite the e-CNY sharing certain similarities with other payment tools like physical cash and electronic payments, Fan suggests that the move is to help bridge the gap between the digital currency and the other tools whose operating systems differ.

The QR code (or Near Field Communication (NFC)) technique makes the completion of payments on the mobile terminals of both shoppers and merchants easier after a scan. Interconnecting it with the e-CNY could be another effort to push interest in the central bank digital currency (CBDC) to more consumers to increase usage.

 

The e-CNY’s potential for growth
Figures released as of April show that over 260 million people are already using the e-CNY in China, and they have engaged in transactions worth more than $13.8 billion. The digital currency is available for use in over 20 mainland cities and is being tested in a cross-border instance with Hong Kong through the mCBDC Bridge project.

On a larger scale, it is also being considered to be made potentially valuable when adopted to power a state strategic plan like the Belt and Road Initiative (BRI). The BRI, with the trade interconnectedness of its over 140 member countries, boasts of a wider cross-border transaction opportunity for the e-CNY if used. That could translate to an increase yuan’s transaction value for China. It could also enable the East Asian giant to capture and turn some of the existing US dollar-denominated international trade transactions into yuan-based.

China is considered to be ahead of many other nations including the US in terms of digital payments. At home, local Chinese authorities, banks and official media, continue to make efforts to get more users interested in the country’s sovereign digital currency. Aside from the ongoing pilot trials, Shenzhen city recently issued e-CNY subsidies to stimulate consumption in its pandemic-hit economy. Like in Shanghai’s Qingpu district where over CNY3 million (US$444,700) was issued as subsidies to entitled employers in e-CNY through the China Construction Bank, Shenzhen distributed about CNY30 million in another case of e-CNY being used for a corporate finance and government service.

 

Consumers still cold to e-CNY
However, despite these pushes to aid consumption and promote the use of e-CNY at the same time, consumers’ response to the e-CNY has been somewhat cold. A May Morning Consult poll found that one in five Chinese adults have downloaded the official e-CNY app, mostly for online shopping. But with its innovative approach, government backing and spread, the e-CNY is still low on transaction volume and popularity when compared to Alipay and WeChat Pay.

Even with the promotion, some reports say the visibility has not swayed over as many consumers. The users are yet to identify the advantages of using the e-CNY over offerings by existing payment platforms Alipay and WeChat Pay.

A senior fellow at the Peterson Institute for International Economics, Martin Chorzempa, had once noted in a CNBC interview that the e-CNY has to beat the two e-payment giants in China which currently process about 95% of digital payments in the country before it ”can make a dent in the U.S. dollar”. The two platforms already offer consumers the options to pay with QR codes and with their faces among other features.

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