Wang Jun, Chief Economist of Centaline Bank: Digital currency may weaken the traditional counter business model

“The application of digital currency will have four levels of impact on banks. First, the traditional business model of the counter may gradually become weaker. Second, if everyone becomes more and more recognized about digital currencies in the future, there will be so-called deposits. The situation of moving house will also have an impact on the business of commercial banks in debt. There are also some commercial banks that have reduced income opportunities. In addition, digital currency, like all online services, will face cyber attacks or data security issues. “On October 23, Wang Jun, chief economist of Centaline Bank, said at the “2021 Global Wealth Management Forum” hosted by Caijing Magazine and Caijing Think Tank. This forum focused on “creating an open and innovative wealth management new highland”.

Wang Jun, Chief Economist of Centaline Bank: Digital currency may weaken the traditional counter business model

Wang Jun, Chief Economist of Zhongyuan Bank

Wang Jun introduced that many bankers in the industry mainly feel that they do not quench their thirst for the current application of digital currency. It is true that M0 has limited functions, but once it enters the M1 and M2 fields, it is not clear what is the difference between digital currency and electronic currency.

So the current potential impact and impact are mainly in M0, but M0 has also produced some signs. For example, in terms of opportunities, for the first time, commercial banks may become the initiative to control the flow of portals. Now it is more in the form of soft wallet APP, which is embedded in the APP of various institutions. In the future, it may be used through mobile phones, watches, bracelets or badges, etc., so-called hard wallets.

Either way, for commercial banks, there may be a concept of traffic entry. Traffic is very important in the digital economy. With traffic, there are customers, business, and revenue and profits. The flow entrance is of great significance to commercial banks.

Wang Jun pointed out that if the scope of the legal digital renminbi is expanded from M0 to M1 and M2 in the future, it may be possible to expand the so-called B-end and G-end.

But digital currency will also have an impact on commercial banks. First, the traditional business model of the counter may gradually become weaker and weaker. Including the so-called go-to-counter rate. Second, if everyone becomes more and more aware of digital currencies in the future, there will definitely be so-called deposits moving, which will also have an impact on the business of commercial banks’ liabilities. There are also reduced revenue opportunities in some commercial banks. In addition, like all online services, they will face network attacks or data security issues.

Regarding the supervision of digital currency, Wang Jun said that a bottom line needs to be determined, such as anti-money laundering and anti-terrorist financing, including how to achieve a better balance between improving efficiency and protecting consumer users’ privacy. As well as dealing with cyber attacks, the issue of data security is definitely a bottom line.

The following is a record of the speech:

Wang Jun: Regarding this topic, digital currency and wealth management, private digital currency represented by Bitcoin has become an important digital asset around the world. Whether it is currency or not, everyone still has questions, but it must be a digital asset. So it is becoming an important part of wealth management.

In China, we do not allow private digital currency issuance, circulation, and transactions. Under China’s environment and context, we mainly discuss the use of legal digital renminbi. I would like to talk about this issue from two perspectives. And experience:

First, as an ordinary consumer, as a practitioner and researcher, I have been paying close attention to the development of digital currency. Therefore, the function of digital renminbi was opened in the bank APP very early. In the previous stage, I also downloaded what the central bank called ECNY’s APP, I found that it already provides a lot of wallet applications, such as Meituan, JD, including some travel companies, airlines, and become its secondary sub-wallets. I also tried to use some, because I usually travel. I can take the subway, and I used its sub-wallet indirectly through Yitongxing.

From my personal experience, it can be said that I don’t have any special feelings. It can be said that I have no feelings compared to using other apps before. It has no effect on my payment habits. I can’t talk about how efficient or how good the experience is. But the same, our digital renminbi is positioned at M0, and all M0 application scenarios are basically comprehensive. Beijing happens to be a pilot city, and now it is in the 10+1 range. The pilot program has just started, and the central bank is very cautious.

Second, I come from a commercial bank. From the perspective of a practitioner and a researcher, I will talk about how digital RMB will affect the operation and management of banks or the future, because we do not yet have the ability to manage wealth, and what impact will it have on wealth management in the future. We have also done some research and analysis. Because it is positioned at M0, its main impact, whether it is an opportunity or an impact, may be concentrated on the so-called C side. In terms of opportunities, this is all potential, because the pilot cities are very limited, and the pilot commercial banks, as the second-tier institutions, are also very limited. Most institutions, most regions, and most people have not yet participated in this. Both opportunities and challenges of the pilot project are still very potential, because its scope of application is too limited. President Wynn has been calling for the use of not only M0 to replace M1 and M2, but I also talk to many bankers in the industry. After talking, they feel that they don’t quench their thirst. It is true that M0 has limited functions, but once it enters the M1 and M2 fields, in fact, our currency is already electronic. What is the difference between digital currency and electronic currency? , So the current potential impact and impact are mainly in M0, but M0 has also produced some signs. For example, in terms of opportunities, we believe that for the first time, commercial banks may become active portals for controlling traffic. With graspers and tools, they are now more embedded in the apps of various institutions in the form of soft wallet apps. In the future, it may be used through mobile phones, watches, bracelets or badges, etc., so-called hard wallets. Either way, I think for commercial banks, there may be a concept of traffic entry. Traffic is very important in the digital economy. With traffic, there are customers, business, and revenue and profits. The flow entrance is of great significance to commercial banks.

Commercial banks may use the wallet as the core and origin to build their own ecosystem. I found that there are many sub-wallets under the central bank’s digital renminbi, which have initially formed some ecology and some scenarios. In the future, with the help of the pilot scenario and ecology of the central bank’s statutory digital renminbi, commercial banks can operate its ecology well. Because our digital renminbi is DCET, we first provide you with the function of electronic payment. Through the provision of this function, you will inevitably know your customers, grab their information, identity information, and mobile phone information, so that commercial banks can understand customers more. A channel through which customers can be acquired. In the future, you can also imagine that for this part of customers, of course M0 does not have the concept of wealth management, but the assets and wealth of the customers behind it can be helped by KYC. You know it better, you are more familiar with it, and you are more aware of its risk characteristics. Knowing that it can manage and manage its wealth, it provides a possibility for commercial banks to build their own ecosystem with the help of wallets.

Because it is a dual offline function, it does not depend on the account or the network. For a very vast country like ours, especially in many villages and mountainous areas, it provides inclusive financial services with a kind of technology. Means, especially at present, when our country is advocating rural revitalization and common prosperity, it also provides a starting point for commercial banks to implement the country’s strategy. Of course, this requires a long process, because it can provide common prosperity with the help of M0. The benefits of services are indeed very limited, because the proportion of M0 cash usage is getting lower and lower, but in any case, it can better cover these long-tail customers who need financial service support.

So now can we think of the potential positive impact on the C-side from these aspects.

In addition, if the scope of the legal digital renminbi is expanded from M0 to M1 and M2 in the future, it is possible that we may also expand the so-called B-end and G-end. Even under the current circumstances, after the merchants participating in the pilot receive the digital renminbi, there is bound to be a process of fund collection and management. In this process, commercial banks can also capture some business opportunities. I saw on the ECNY page of the central bank and saw that in addition to the wallet function, there are also party dues paid through this channel. There are some opportunities for G-end business, such as whether the future is the payment of public utilities or even transfer payments. If it is carried out through ECNY, there will be some opportunities in the G-side business. These potential opportunities can be imagined and prepared.

It does not deny that there have been some impacts on commercial banks. The central bank is very cautious in its pilot projects. It takes small steps to take into account the impact on commercial banks, the financial system, and even the monetary policy. From the perspective of commercial banks, there are several possible impacts. If everyone’s habits replace physical cash and use digital renminbi, for banks, first, the traditional way of operating over the counter and the operation of outlets. The model may gradually become weaker and weaker, the so-called de-counter rate. Second, for possible deposits to move, for example, if I transfer 100 yuan to take the subway and buy things, I will use it in the future, but it is impossible to put a lot of money in the form of digital renminbi. If everyone is more and more recognized in the future, and more and more scenarios are used, there will be so-called deposits moving. This will have a certain impact on commercial banks and the debt business. In addition, there are some opportunities for commercial banks to collect payments, such as ATM cash withdrawals and inter-bank transfers. Banks charge a small fee. There is no transfer of digital renminbi, so it has an impact on the bank’s intermediate income. In addition, because it provides services in a digital way, it will inevitably face network attacks or data security issues like all online services. Recently, we have also seen some online rumors that the data of a certain country’s central bank is being sold online, indicating that not only the security of data from commercial institutions, including the security of government agencies and central bank data, is also a topic worthy of attention, so let’s look at it. As the central bank is very cautious in this area, it may consider potential risks and shocks. For commercial banks, there are definitely many potential opportunities and business opportunities. Risks and impacts also need to be paid attention to and pre-judged and prepared in advance.

Wang Jun: Digital knows no borders on this issue, and countries do need to strengthen cooperation and exchange more in their attitudes towards digital currency. Our People’s Bank attaches great importance to international exchanges and cooperation from the beginning of research to the beginning of the pilot digital renminbi. From my perspective, I think three points are more important: The first is to determine a bottom line, such as anti-money laundering and anti-money laundering. Terrorist financing, including how to achieve a better balance between improving efficiency and protecting the privacy of consumers and users, our current statutory digital renminbi is controllable and anonymous, which is more controllable and anonymous than ordinary traditional payment methods. , The bottom line must be determined. There is also network security. The issue of network attacks and data security is definitely a bottom line.

The second is to determine the standards for international cooperation, such as technical routes or operating rules. Maybe everyone’s starting point or foundation is different. These standards and rules are also different. This may need to be emphasized in international cooperation. solved problem.

Last but also a recent reality, China is basically shutting out private digital currencies. These cryptocurrencies are actually still rising overseas. How to understand them? It is not possible to say a unified attitude or regulatory standards now, at least in the future. The expected difference of such policies may generate some risks or may lose some opportunities, which is also a very important aspect of international cooperation and exchanges.

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