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October 23, 2020updated 20 Jan 2022 6:41am

Digital currency trial in Shenzhen is another step closer to universal financial inclusion

By Evie Rusman

The Chinese central bank recently put its digital currency on trial in the city of Shenzhen. Around 50,000 residents participated in the trial, and many felt it was just as easy to use as the Alipay and WeChat Pay methods that they have been used to.

Without the need for a bank account and internet access to use the digital currency – which is very different to a digital wallet – the differences between the two are what will drive a truly cashless environment. Most importantly, digital currency is the key to achieving total financial inclusion.

In early October, the Chinese central bank trialed the issuance of its own digital currency – the Digital Yuan – in Shenzhen. Over 19 million residents of the city participated in the registration for the draw and 50,000 were issued with a digital red envelope of RMB200 ($30) in digital currency. Across the city, over 3,000 merchant locations had also been set up to accept digital currency, and consumers were able to pay for goods and services using digital currency or even make peer-to-peer payments.

Those who used the digital currency said that the experience was very similar to that of Alipay or WeChat Pay. However, this digital currency does not simply ape that model but builds on it, bringing with it the possibility of extending financial inclusion to universal levels.

While the usage experience of digital currency will be very similar to that of a digital wallet, there are some very significant differences. Unlike mobile wallets, digital currency is just like bank notes and coins, except that it is digitised and can be stored in a mobile phone; a wallet requires an account of some kind (even if just a prepaid account) to be linked to it. Just like as if cash were taken out of an ATM, the cash stays with the owner and, in the case of digital currency, it stays in the owner’s phone, hence there is also no need to be connected to the internet for digital transactions to be completed.

With different requirements and internet infrastructure, the characteristics of the digital currency without the need for a bank account and internet are especially relevant for the unbanked and underserved segment. People living in developing economies, especially in rural areas where it is not efficient for banks to operate, often don’t have much money, and many banks are not interested in servicing this segment. Therefore, the digital currency usage – as demonstrated in Shenzhen over the past week – addressed the two most significant obstacles to resolving the issue of financial inclusion.

The trial in Shenzhen means that things are moving along and as such, a digital currency and electronic payment function bring along great interest from markets that are in need of such a platform.

Related Report
Pages: 86 Published: October 2020 Report Code: GDFS0447CI Add to Saved List Overview Contents GlobalData’s ‘India Cards and Payments – Opportunities and Risks to 2024' report provides detailed analysis of market trends in the Indian cards and payments industry. It provides values and volumes for a number of key performance indicators in the industry, including cash, cards, credit transfers, cheques, and direct debits during the review-period (2016-20e). The report also analyzes various payment card markets operating in the industry and provides detailed information on the number of cards in circulation, transaction values and volumes during the review-period and over the forecast-period (2020e-24f). It also offers information on the country's competitive landscape, including market shares of issuers and schemes. The report brings together GlobalData’s research, modeling, and analysis expertise to allow banks and card issuers to identify segment dynamics and competitive advantages. The report also covers detailed regulatory policies and recent changes in regulatory structure. This report provides top-level market analysis, information and insights into the Indian cards and payments industry, including – – Current and forecast values for each market in the Indian cards and payments industry, including debit, credit, and charge cards. – Detailed insights into payment instruments including cash, cards, credit transfers, cheques, and direct debits. It also, includes an overview of the country's key alternative payment instruments. – E-commerce market analysis. – Analysis of various market drivers and regulations governing the Indian cards and payments industry. – Detailed analysis of strategies adopted by banks and other institutions to market debit, credit, and charge cards. Scope – In a move to promote digital payments, the government abolished the merchant service fee on payment transactions made using RuPay cards and UPI effective from January 1, 2020. In addition, all businesses with annual turnover of more than INR500m ($7.01m) must provide their customers with the option to pay electronically via RuPay debit cards and UPI QR codes. These moves are expected to boost payments via domestic real-time payment system UPI at merchant locations, along with RuPay debit cards. – There is also a growing preference for alternative payment solutions such as Paytm, Google Pay, Visa Checkout, Amazon Pay, PayPal, and Masterpass in India. Google Pay has been one of the beneficiaries of growing digitalization, accounting for a 9.3% share of total e-commerce payments – a significant jump from 3.5% in 2019. It is gradually catching up with Amazon Pay, the leading alternative payment solution, which holds a 11.3% share. – Buy now pay later is gradually gaining traction in the Indian payment market, with an increasing number of merchants, banks, and payment providers now offering this service. In January 2017, Flipkart introduced an option that allows customers to purchase goods up to a total value of INR10,000 ($140.27), which can be repaid at the end of the credit cycle without any charge. International companies are also planning to enter the market. In August 2020, US-based buy now pay later provider Sezzle announced it will launch in India by the end of 2020. The company had already launched a pilot and is in the process of integrating with the UPI platform. Reasons to buy – Make strategic business decisions, using top-level historic and forecast market data, related to the Indian cards and payments industry and each market within it. – Understand the key market trends and growth opportunities in the Indian cards and payments industry. – Assess the competitive dynamics in the Indian cards and payments industry. – Gain insights into marketing strategies used for various card types in India. – Gain insights into key regulations governing the Indian cards and payments industry. Companies mentioned State Bank of India HDFC Bank ICICI Bank Axis Bank Bank of Baroda RuPay American Express Visa Mastercard Diners Club Fiserv Paytm Jio Money PhonePe Table of Contents Table of Contents Payment Instruments Card-based Payments Merchant Acquiring Pricing USD — US Dollar Single User:$2,750 Site:$5,500 Enterprise:$8,250 Discounts available for multiple report purchases. +44 (0) 161 359 5813 Join our mailing list Email Recently viewed reports DBS Group - Enterprise Tech Ecosystem Series Retail Banking Channels in a Pre and Post COVID-19 World
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