Digital RMB is connected to Alipay, “Touch” and “Sweep” compete in the same field

“Touch” or “Sweep”? It is worth waiting for the time when people will be more accustomed to which payment method.

Digital RMB is connected to Alipay, "Touch" and "Sweep" compete in the same field

Wen|Hu Xiaofeng

  In 2021, the digital RMB pilot and promotion will be accelerated, with access to six state-owned banks and online merchant banks, and Alipay using online merchant banks to open up digital RMB payments.

  Some users can see the “Digital RMB” when they open Alipay’s “My” interface. When users pay via Alipay payment code, they can choose digital RMB (Neteller Bank), and the setup is similar to other payment methods. However, this feature is still in small-scale internal testing.

 With the huge traffic and rich application scenarios of third-party payment platforms, it is only a matter of time before digital RMB payments are fully rolled out, and whether they will replace third-party payment platforms in the future has become a hot topic of discussion in the industry.

  In this regard, Zhou Xiaochuan, president of the China Society of Finance and honorary dean of the Wudaokou School of Finance at Tsinghua University, said clearly that the development of digital RMB is based on the modernization of the domestic payment system, keeping pace with the digital economy and the Internet era, improving efficiency and reducing costs, especially for the retail payment system, and is not a mutual replacement for third-party payments.

  Third-party payment platforms are also actively laying out and promoting digital RMB. Every technological change brings challenges and at the same time ushers in new opportunities. Will digital RMB be an opportunity for third-party payment platforms to reshape the landscape?

  Payment Senselessness

  Digital RMB and third-party payment platforms are different in nature: according to the official definition, digital RMB is positioned as M0, legal tender and “money”, while third-party payment platforms are financial infrastructure and “wallets”.

  Bo Chunmin, the research director of EqualOcean’s Production & Finance Division, regards the emergence of digital RMB as the evolution of the increasingly senseless payment channels. People’s payment methods have evolved from the initial barter, to gold, silver, cash, card, code, face and other mobile payments, and then to the current digital RMB stage – consumers do not need to be connected to the Internet and can finish payment by touching it.

  In the history of business development, every technological revolution is an opportunity to promote significant changes in business, and the upgrade of payment technology is no exception.

  The birth of Alipay once made online virtual transactions a reality and facilitated the booming of the domestic e-commerce industry. By the new era of digital economy, digital RMB as the new trend of payment, the possible opportunities for change are still unclear, but related companies have already laid out early.

  Alipay is still ahead of the curve, with the Ant Group’s Net Merchant Bank being the seventh digital RMB operator, following the six state-owned banks. Ant Group has the advantage of scenarios and technology and has been deeply involved in the digital RMB development process.

  In late 2017, NetShares Bank was involved in the digital RMB R&D trials, and now has piloted several scenarios including BoxMart, RT-Mart, Tmall Supermarket, Haro Bicycle, and Shanghai Public Transport. Ant’s distributed database, OceanBase, and mobile development platform, mPaaS, were also introduced to advance digital RMB technology as early as 2019.

  Not only Alipay, but several companies are laying out digital RMB pilots in an attempt to capture new payment methods and opportunities.

  Some industry sources told EqualOcean that digital RMB is in the technical testing stage, using cooperation with a large number of scenario parties to test whether it can run through the overall payment system. Zero2IPO reports that in 2019-2020, the Digital Currency Institute signed strategic cooperation agreements with more than a dozen units, including Shangtang Technology and Jingdong Digital Technology, with partner institutions covering all aspects of exchange circulation, and all of them are leaders in their fields.

  Meituan Dianping, bilibili, and Byte Jump have all announced cooperation with banks involved in the digital RMB project; Weizhong Bank has appeared on the interface of the digital RMB wallet with the status of opening soon; Lakala’s 2020 financial report shows that it invested over 30 million yuan in digital RMB during the reporting period and plans to invest 500 million yuan in the next three years to promote and enhance digital RMB and merchant digital services; HNA Group Freshman Payment has provided technical support and merchant support services in the pilot payment of Hainan cross-border e-commerce in digital RMB; and Jingdong Digital Technology has piloted corporate payment and digital RMB payroll.

  The impact goes beyond payments

  Although not a replacement relationship, the retail payment scenarios piloted by Digital RMB, both on online e-commerce platforms and offline stores, overlap with third-party payment methods and competition is inevitable.

  As an emerging payment method, digital RMB has many advantages in many aspects, which are particularly evident in technology, such as having payment-as-settlement, controlled anonymity, and dual offline payment.

  Payment-as-settlement, that is, the transaction process no longer uses the services provided by the third-party payment platform and does not need to go to the banking system for clearing, can achieve the goal of short and fast transactions, that is, short transaction chains, smooth processes, faster, lower transaction costs for both sides, and clearer legal relationships.

  From the perspective of consumer use, controlled anonymity is a major advantage of digital RMB. According to Huang Dazhi of Suning Financial Research Institute, consumers buy things and don’t want others to see what I bought and how much I spent. The privacy protection of controlled anonymity of digital RMB can hide this information.

  The dual offline payment function, which means transactions can be made without the internet, gives room for imagination for some new payment scenarios in the future.

  However, the impact of digital RMB on different types of third-party payment platforms is different, and the impact needs to be considered from different aspects.

  In Huang Dazhi’s view, third-party payment platforms in the market are divided into the following three categories: absolute head platforms represented by Alipay and WeChat Pay; third-party payment platforms embedded in their own group ecology, such as Baidu, Jingdong, Suning, Ctrip, Meituan, etc.; and smaller independent third-party payment platforms.

  Public data shows that the first echelon of Alipay and CaiPay Tong currently occupy the head of the market with a large lead, while the second echelon of payment companies are making efforts in their respective niche areas.

  Huang Dazhi said that Alipay and WeChat occupy a very large market in retail payments, with good user experience and real-world cases, and consumers will still enter the consumer digital RMB from this channel considering the convenience and speed.

  The revenue from this part of the market is also considerable. According to the prospectus disclosed by Ant Group 2020, the revenue of digital payment and merchant services in the first half of 2020 was 26.01 billion yuan, accounting for 35.9% of the total revenue.

  Currently, people are accustomed to using Alipay and WeChat Pay for shopping checkout, but as the digital renminbi, which is targeted at retail payments, enters commercial use, it will inevitably change the payment habits of some people to settle their purchases in digital renminbi. If users switch to digital RMB payments on a large scale, it will inevitably eat into part of the market and reduce corresponding revenues.

  The bigger challenge for Alipay is “payments + services” than the impact on payments themselves.

  Some payment institutions analyze consumers’ payment data, such as payment amount, users, and purchased items, to carry out online accurate marketing and push, and provide loans, credit, and wealth management services. According to Huang Dazhi, after the launch of digital RMB with controlled anonymity, these payment institutions do not necessarily have access to information related to consumer payments.

  However, the main role of payment platforms that rely on their own group ecology is not to make profits, but to serve the whole group and link various businesses together; relatively independent third-party payment platforms, whose business is also mainly on the B-side, will not be greatly affected by digital RMB that mainly serves retail payments.

  The promotion of digital RMB is a gradual process, and the impact on “Alipay” will be long-term and gradual.

  Flow and Scenario Battle

  As digital renminbi becomes commercially available, there will be a variety of payment methods co-existing in the market in the future.

  However, it should be clear that both digital renminbi and other payment tools need to be accessed from a single channel, so traffic and scenarios are still a must for payment platforms.

  In the competition for user traffic, the above-mentioned industry insiders believe that it is important to look at public domain traffic and private domain traffic separately.

  Private domain traffic is more closely tied to the company’s scenario and business, such as vertical e-commerce, travel, medical and other platforms, and will not be affected too much by the emergence of digital RMB, which will not cancel cooperation with third-party payment companies.

  Public domain traffic is more easily replaced by other competitors, and head platforms such as Alipay and WeChat Pay are among those with large amounts of public domain traffic. They need to focus more on how to cut into the digital RMB and consolidate their core competitiveness in the third-party payment industry.

  At one time, Alipay and WeChat Pay laid down the pattern of the payment market through the red envelope war. In the future, we do not rule out the promotion of digital RMB, which will also cultivate consumers’ habit of using digital RMB through a logic similar to that of the red envelope war, thus changing the competitive landscape of the market. In addition, subsidizing consumers and merchants through the scenario end is also a way to encourage people to use digital RMB payments.

  At the same time, it is more important for payment platforms to look beyond the payment perspective to find a bigger space to compete and innovate on the scenario.

  As an example, the above-mentioned industry insider said that the future dual offline payment function can help two main scenarios to ensure the smoothness and reliability of payment. One is to connect the network edge areas, such as remote mountainous areas and other universal service related scenarios; the second is to apply in areas where the network signal is not good, but the demand for payment scenarios is relatively wide, similar to the consumption scenarios of high-speed moving trains, airplanes, unmanned intelligent networked cars, etc.

  In his public speech, Zhou Xiaochuan also pointed out the transaction scenarios in which digital RMB can improve efficiency, including retail payment, wholesale system, exchange system, trade settlement, cross-border payment, etc. Currently, Hainan’s cross-border import e-commerce platform has already implemented digital RMB payments.

  It is worth noting that the new payment regulation “Regulations on Non-Bank Payment Institutions” is in the consultation stage, and in combination with the future development of digital RMB, third-party payments are facing a brand new regulatory environment and competitive environment.

  From these perspectives, the aforementioned industry insiders believe that instead of being a replacement for third-party institutions, digital RMB may become an important weapon for the future development of payment institutions.

  Beyond the flow scenario, the launch of digital RMB also gives third-party payment platforms the opportunity to innovate their business models.

  Lakala disclosed to the public that an important source of future revenue is to bring the company’s payment business in and benefit from other payment methods through the advancement of digital currency acceptance. One of the next priorities is to do the acceptance of digital currency in B2B market, bringing together the upstream and downstream of the industry chain, driving the digital currency business and collecting the corresponding commission.

  Under the general trend of increasing popularity of digital economy, enterprises have sought digital transformation. Huang Dazhi believes that the first step in the digitalization of modern enterprises is often the digitalization of payment services. For those third-party payment institutions that are located in the B-side payment and are more independent, they can think more about how to connect the C-side and B-side and charge fees to the B-side.


   When it comes to digital RMB, consumers are more concerned with the question: When can I use it? Do I have to use it?

  News about the pilot application of digital RMB continues to spread, but few people have actually experienced digital RMB payments. While the number of pilots has been increased and expanded, the digital RMB is still some time away from being fully rolled out.

  To promote the digital RMB, consumers need to develop the habit of using it and be guided rather than forced to do so. Theoretically, the more investment, the faster the rollout.

  As Li Lihui, former president of the Bank of China, said, it is expected that in the next 5-10 years, digital renminbi will be parallel to payment tools such as WeChat Pay, Alipay, Cloudflare and bank cards.

  ”Touch” or “sweep”? It is worth waiting for the time when people will be more accustomed to which payment method.

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