From bill payment to food service, to transportation and shopping, digital RMB applications blossom in China over the past year since the first externally controlled pilot of digital RMB was launched in Luohu, Shenzhen in October last year.
The latest data shows that ten Chinese cities and the 2022 Beijing Winter Olympics have launched digital RMB pilots, and some cities have also launched scenarios for the use of digital RMB for green travel and low-carbon red packets. As of October 8, 2021, there are more than 3.5 million digital RMB pilot scenarios, with a cumulative total of 123 million personal wallets opened and approximately 56 billion yuan in transaction value.
Yicai’s recent research found that several consumption scenarios in Shanghai, such as vegetable markets and shopping malls, have seen the digital RMB figure. In the industry’s view, the application scenarios of digital RMB will be further popularized in the future, and in the process, third-party payment institutions will face the challenges of user competition and data management.
Pilot scenarios continue to be enriched
At the end of 2019, digital RMB launched pilot tests in Shenzhen, Suzhou, Xiongan New Area, Chengdu and the 2022 Beijing Winter Olympic Games scenario; in November last year, six new pilot test areas were added, including Shanghai, Hainan, Changsha, Xi’an, Qingdao and Dalian.
So far, the digital RMB pilot provinces and cities basically cover different regions such as Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei, Central, West, Northeast and Northwest. At present, all of these regions have basically launched digital RMB pilot tests, and some have also launched digital RMB bonus-type spending incentives to attract the attention of a host of consumers.
The digital RMB has appeared in Wuzhong Market, a food court on Urumqi Road in Shanghai. It is understood that the digital RMB collection and payment function of Wuzhong Market is mainly built by Huifu World. Consumers can simply install the Digital RMB App and make digital RMB payments by opening QR codes and being swept.
For example, when purchasing vegetables, consumers put the goods on the smart electronic scale in front of the stall, and the display will show the name, unit price, weight and final price of the goods, etc. After confirmation, consumers can open the Digital RMB App and click the payment code to complete the payment; at the same time, consumers can also scan the small ticket with QR code to trace the source of the food. Almost every stall in the market has a prominent “Welcome to Digital RMB” sign in front of it.
In addition to the vegetable market, the century-old brand “Qiaojiajie” can also support digital RMB payments, also supported by Huifu World. In fact, since the launch of the digital RMB pilot, third-party payment institutions have participated in it, which, in the industry’s view, will help payment institutions enhance merchant stickiness.
UnionPay Commerce also completed the layout of digital RMB in several scenarios in Shanghai in October this year. For example, UnionPay offers a full set of digital RMB solutions at Longhua Temple, Sinopec No. 1 gas station and Hongqiao Community AI canteen. As of October this year, UnionPay Commerce has landed 55,000 merchants accepting digital RMB nationwide.
Currently, the pilot rollout is still ongoing, and merchants, as the cornerstone of digital life, will only be able to blossom everywhere with the continued inclusion of more merchants in different scenarios. “Digital RMB is suitable for all scenarios, not just new businesses but also old ones, as digital RMB is destined to be the mainstream payment method in the future.” Zhou Ye, chairman and CEO of Huifu World, said.
According to Wang Pengbo, senior analyst at Broadcom Analytics, the digital RMB pilot is now seen as praiseworthy, with the landed life consumption scenarios greatly expanded. “The pilot shows a wide and representative selection of regions and an orderly expansion of scale, which has met expectations both for public and private, laying a solid foundation for further promotion and use in the follow-up.”
As for the focus of future digital RMB pilot work, Wang Pengbo said that it may focus on three aspects. First, the construction of the ecological system, such as how to interact with platform-based payment institutions, how to promote the construction of the market and the upgrade of the acceptance system, and how to form a pricing mechanism that is easily accepted by all parties, will be gradually clarified; second, the construction of security, including the construction of system security, risk control mechanism and anti-money laundering system; third, how to further play the digital RMB in more scenarios of financial inclusion and new rural construction The third is how to further play the special role of digital RMB in more scenarios of financial inclusion and new rural construction.
The problem of a single profit model needs to be solved
While the digital RMB is gradually being promoted, the number of participants is also expanding, with more and more third-party payment institutions joining in. Recently, payment institutions such as HuifuPay, UnionPay and Lianlian have been connected to the Digital RMB interoperability platform of the Central Bank’s Institute of Digital Research.
In the “two-tier operation system” of digital RMB, third-party payment institutions mainly play the role of digital RMB circulation promotion channel, which is regarded as “2.5 tiers” in the market; the first tier is the central bank, which is responsible for issuing digital RMB; the second tier is the six major state-owned banks The first layer is the central bank, which is responsible for issuing the digital renminbi; the second layer is the six major state-owned banks, as well as NetBank and WeChat, which are the operators of the digital renminbi and are responsible for exchanging the digital renminbi to the public.
In the view of many industry insiders, the promotion and popularity of digital RMB will bring new development opportunities for third-party payment institutions. For example, it will help payment institutions to promote relevant industries for digital upgrading and transformation, especially the needs of important customers to meet; this time, there are also listed payment institutions mentioned in their performance reports that with the promotion of digital RMB, the company’s business began to quickly involve in the industrial supply chain and scenic spots that were not previously involved, and the company will thus gain more market share in the payment market.
However, it should be noted that compared to banks, third-party payment institutions may face greater challenges. On the one hand, banks have a first-mover advantage in the digital RMB payment field, which, combined with the controlled anonymity and security features of the digital RMB itself, may frustrate the original leading position of third-party payments, resulting in partial user loss and information loss.
According to Wang Pengbo’s analysis, in the future, Chinese banks may use the popularity of digital RMB to further take away part of the payment market share and active users originally occupied by third-party payment institutions to achieve traffic base stations, which in turn will have an impact on the intermediary service fee income and other value-added businesses of third-party payment companies.
On the other hand, “there is currently less information revealed at the central bank level on how digital RMB data is being managed, which is where the uncertainty lies as to whether the operators can currently differentiate themselves in the payments market.” Wang Pengbo said.
Therefore, in the face of potential challenges, third-party payment institutions need to make adjustments in many aspects of their products, services and business strategies.
At present, most payment institutions still take payment fees, etc. as the main source of profit, with digital service revenue accounting for mostly less than 10%, and the problem of a single profit model remains unresolved. It is suggested that payment institutions can further provide solutions involving marketing services, account management, data services, aggregation of transactions and other aspects of the whole scene and model on the basis of scene coverage.
For example, in the digital solution provided by Huifei World for Wuzhong Market, in addition to creating a digital RMB payment method on the consumer side, the “digital market” solution also provides multi-wallet aggregation collection, multi-level account and fund management, real-time account splitting, online and offline interoperability, membership management, points and vouchers, etc. for the market. The solution also provides digital management functions such as multi-wallet aggregation collection, multi-level account and fund management, real-time account sharing, online and offline interoperability, membership management, points and voucher marketing, etc. to help enterprises accelerate digital transformation. Source