The Chinese central bank digital currency known as e-CNY went on trial in April 2020. By the end of January 2022, around $8 billion worth of transactions had been conducted by around 260 million users of the People’s Bank of China’s (PBOC’s) e-CNY digital wallet. Initial rumours suggested China’s central bank would cut Alipay and WeChat Pay out of the e-CNY ecosystem. However, it has now been confirmed that both Alipay and WeChat Pay will participate in the central bank digital currency.
Alipay currently has around 900 million users in China, compared to 800 million users for WeChat Pay. These two digital wallets have been widely used by consumers across China since they were launched less than 10 years ago. Yet Alipay and WeChat Pay have developed into something far beyond just payment platforms. Chinese consumers use them to make doctor’s appointments, book hotels and train tickets, call taxis, and much more. These two mobile wallets have become an integral part of the daily lives of consumers in China.
The PBOC clearly recognises that it cannot convince consumers to switch away from Alipay and WeChat Pay en masse. Instead, the PBOC needs to Alipay and WeChat Pay to support the e-CNY on their platforms in order to boost awareness and uptake of the digital currency. To this end, in January 2022 it was announced that WeChat Pay will support the e-CNY. This follows the May 2021 announcement that Alipay will support the digital currency.
The latter move was particularly surprising given the battles between Alipay’s parent company Ant Group and Chinese regulators. Teaming up with third-party providers will undoubtedly help PBOC roll out its e-CNY faster but may create issues around privacy and control over data. At least the PBOC will still have full control of the back-end infrastructure. And with Alipay and WeChat Pay already having such a dominant position in the market, partnering with them was ultimately the only option for PBOC.
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