If China's central bank's digital RMB offering is successful, it will likely have an impact on the current Chinese mobile payment landscape. So, will Alipay and WeChat Pay be eliminated?
In an interview with CGTN on August 19, Professor Song Siqi of Fudan University's Fanhai International School of Finance said that the Chinese market is unique in that Alipay and WeChat have formed a dual oligarchy, accounting for 95% of the mobile payment market.
This is not a good thing, he argued, and in fact there is already a debate over whether these third-party commercial companies have too much power. And the emergence of a central bank digital renminbi could improve the existing competitive environment, or provide a more reliable alternative.
But third-party platforms such as Alipay and WeChat are not going to disappear, but could benefit from it, he said.
This has to do with the digital RMB distribution mechanism - a two-tier operating system. Specifically, the People's Bank of China (central bank) first converts digital RMB to third-party commercial banks or other financial institutions, and then these institutions exchange it to the public.
Alipay and WeChat, as financial institutions, are also eligible to distribute and circulate the digital currency. Alipay had already disclosed five patents related to the central bank's digital currency a few months back.
What's more noteworthy is that the central bank digital currency will also cooperate with many third-party platforms.
On July 8, media reported that Didi Chuxing and the People's Bank of China's Digital Currency Research Institute officially entered into a strategic cooperation agreement to jointly study and explore the innovation and application of digital RMB in the field of smart travel. It was also reported that Meituan, Bilibili, and ByteDance have also been involved in the central bank's digital currency project.
China's digital renminbi is currently being piloted on a small closed scale, perhaps only to be used in the 2022 Winter Olympics scenario, but the central bank has also not given a specific timetable.
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