Although the App is online, the digital renminbi is still far from popularization

This week, the digital RMB (pilot version) App was officially launched on major app stores. This is the first time that the digital RMB App download channel has been disclosed since the Shenzhen pilot in October 2020, which is a milestone for its industrial development.

As for why it is only on the shelves at this time. The Financial Times, a media affiliated to the People’s Bank of China, answered that in the early digital RMB pilot activities, whitelisted users installed the app by obtaining the exchange code and installation package. There were problems such as long installation steps, complicated operations, and inability to download and use repeatedly. In order to improve the user experience, the launch of the digital RMB App was launched in combination with the large amount of feedback and suggestions received in the previous pilot activities. 

For a time, the Digital RMB App even rushed to the top of the Apple App Store.

Although the App is online, the digital renminbi is still far from popularization

Another wave of digital renminbi fever, and the digital renminbi app accessible to everyone has given the public the illusion that the digital renminbi has entered the stage of popularization. Many relatives, friends, and even financial media reporters asked the author, is it really going to be popularized? Rationally speaking, the author believes that there is still a long way to go before the popularization of digital renminbi.

Online situation

It is understood that the application markets on the digital RMB App include Apple App Store; Huawei, Xiaomi, OPPO, vivo mobile application markets; App Store, 360 Mobile Assistant, Baidu Mobile Assistant, Wandoujia and other Android markets. The scope of this listing is limited to the Chinese app market. 

Although the digital RMB App can be downloaded by everyone, not everyone can use it. At present, the digital renminbi is still in the routine testing stage in the research and development process, and whitelisted users expanded by operating agencies in pilot areas and pilot scenarios can register for the digital renminbi app.

Although the App is online, the digital renminbi is still far from popularization

So in fact this is not fully online. Of course, this area is not strictly restricted, and many people can successfully register by modifying their positioning and applying to banks. However, most of the current acquiring scenarios are limited to the areas where the pilot is carried out. Even if the digital RMB pilot quota is obtained in other regions, it can only be used for transfers between individuals, and consumption scenarios are difficult to find.

What’s the difference

The point is to talk about how far the digital renminbi is popular, or what other prerequisites are needed to support its popularization.

The first is a mature market incentive model. Compared with the traditional four-party model of bank card acquiring, digital RMB does not bear interest and has no handling fee (currently none), so how to obtain benefits from it is what every payment practitioner cares about.

At the WeChat Open Course PRO held this week, WeChat Pay revealed that so far, WeChat Pay has more than 23,000 monthly active service providers, more than 1,800 bank and payment institution partners, and more than 1 million ecological business partners. This is only a service provider of WeChat Pay. With such a large group of service providers, most of them rely on payment fees to survive. If the existing payment fee sharing model is completely abolished, digital RMB needs a mature incentive mechanism to be more market-oriented. to promote the digital renminbi to the road of sustainable development. 

At present, aside from the traditional payment fee-sharing model, the programmability of the digital renminbi is the most likely attribute to extend the revenue model, but how to make profits is what many market institutions are thinking about.

Second, the rights and responsibilities of participants need to be subdivided . After years of development in the payment industry, the Sifang model has become mature. With the advent of online payment, the voice of the new Sifang and the online payment Sifang model is getting louder and louder. The core is to define the rights of each participating role. responsibility, how to be responsible to users and merchants. For example, the responsibilities of all parties in typical abnormal transactions such as anti-money laundering, chargeback, and fraud.

At present, the Digital Currency Research Institute of the People’s Bank of China (referred to as the Digital Currency Research Institute) undertakes most of the responsibilities of the digital renminbi pilot, from specifying rules to market access and pilot implementation, all of which are closely related to the Digital Currency Research Institute. In the future, as the digital renminbi matures, the People’s Banking System will naturally need to decentralize, the supervision will belong to the supervision, and the market will belong to the market. Whether banks, payment institutions, and service provider systems need to learn from the current acquiring specifications, or how to update and upgrade, these need to be improved in the continuous advancement of the pilot program.

Third, the formulation and improvement of laws and regulations . Although in essence, this is still a matter of rights and responsibilities of industrial roles, digital RMB, as a legal currency, must rise to the legal level to ensure that its promotion cannot be refused and the rights and interests of merchants and users. 

In October 2020, the “Law of the People’s Republic of China on the People’s Bank of China (Revised Draft for Comment)” was released. The draft for comments intends to stipulate that RMB includes both physical and digital forms to provide a legal basis for the issuance of digital currency; in order to prevent virtual currency risks, It is clear that any unit or individual is prohibited from making and selling digital tokens.

This provides a legal basis for the issuance of digital renminbi. Of course, not only the revision of the People’s Bank of China Law, but also many laws and regulations need to keep up, which are all prerequisites for the gradual popularization of the digital renminbi in the future.

Fourth, the risk control has reached the level of regulatory permission. This is a combination of technology, market, and policy. The struggle with gray and black production is an unavoidable topic in the payment industry. The meaning of compliant operation will vary with changes in the market and policy environment. For example, at the beginning of 2014, barcode payment was suspended, and with the acceptance of the market and the improvement of regulatory policies, in 2017, the People’s Bank of China officially issued Document No. 296, accepting the existence of barcode payment. 

In 2021, the digital renminbi is also undergoing the test of gray and black production, such as pyramid schemes, telecom fraud, money laundering and other illegal activities. Criminals take advantage of people’s lack of understanding of the digital renminbi to do evil. But at the same time, this is a positive sign of the digital renminbi, and the continuous improvement of the mechanism to avoid being used by these gray and black products makes the digital renminbi system more mature and the process of popularization. 

In general, the digital renminbi is still far from being popularized, the launch of the App is still a small step, and more core issues remain to be solved. Finally, everyone has nothing to do to read the “White Paper on the Development of China’s Digital RMB”, such as whether the digital RMB will replace the QR code payment, whether the digital RMB will kill WeChat Alipay, and whether the digital RMB will replace cash and so on. Questions will have answers.

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