The CBDC and payments system is set to balance out the domination of tech giants Alibaba and Tencent
A report by the Financial Times has shared that the People’s Bank of China (PBoC) is allegedly using its digital currency electronic payment system (DCEP), as part of their central bank digital currency (CBDC) strategy in an attempt to ease Tencent and Alibaba’s market share dominance in digital payments.
According to the report, Alibaba’s Alipay controls almost 56 percent of all of China’s mobile payments network. Furthermore, an unnamed source revealed that the former governor of the PBoC gave the two tech giants significant freedom, despite protests from the China Banking Regulatory Commission (CBRC) and commercial banks.
As a result, it appears that the two tech companies have expanded, uninhibited, to a point where they have become difficult to manage. The PBoC wants to remedy this by curbing the dominance of their online payment platforms, Alipay and WeChat Pay, effectively giving commercial banks a more equal playing field.
A top official of the Hong Kong Monetary Authority affirms these sentiments in a statement regarding the role of digital currency in domestic retail:
“It is about the role of a digital currency for domestic retail use. They want a more level playing field for the banks. Retail payments are so dominated by Alibaba and Tencent while banks are less active in electronic payments.”
The CBDC project is still developing at a consistent pace. Recently, it was revealed that the state-owned Agricultural Bank of China (ABC) has joined the roster of entities and corporations that are conducting beta tests on the digital currency.
The ABC has developed an internal mobile application to be used by a select number of employees within the bank for trialing the nation’s CBDC.
The app can be downloaded on both Android and iOS smartphones, or downloaded from the bank’s official website. Employees can use the app to pay through QR codes, conduct transactions and manage their payments just by touching another user’s phone with their own.
Other partners in the beta test program include several fast food conglomerates, such as Starbucks, McDonald’s and Subway, the Chinese e-commerce giant Meituan Dianping, and the Chinese Uber company, Didi Chuxing.
Many speculate that the digital yuan, when launched, could also be used in cross-border payments. This is likely to occur because the PBoC is capable of leveraging the government’s $1 trillion Belt and Road initiative for the DCEP.
Fellow crypto-enthusiast nation, South Korea, is also working towards launching its CBDC.