The world is anxiously watching China’s digital yuan to learn how quickly a Central Bank Digital Currency (CBDC) will be adopted. The primary concern among world leaders is its potential impact in world trade. There is also interest in how quickly consumers might adopt digital money, but given the poor consumer adoption reported here, perhaps the payment tools consumers use today are sufficient. I’m sure a majority of participants in the payments ecosystem hope this remains true:
“Primarily, e-CNY has been distributed in free-to-enter lottery-type promotions and through discount deals designed to encourage downloads of the central bank’s app and digital wallets. Giveaways aren’t nationwide; they have been run in particular cities on specific dates and so far have left out small towns and rural areas. Based on central-bank numbers, the average amount spent per transaction was under $1.
Pointedly, China’s annual online shopping extravaganza in November, known as Singles Day, featured only limited promotion of e-CNY, a currency designed for the internet.
The online retailer JD.com Inc. made it a payment option during the event as part of a plan to encourage adoption of digital wallets. The company said 100,000 customers used e-CNY in 240,000 orders but declined to say how much of the total $55 billion spent during the sales period it constituted; it was likely a fractional portion. The e-CNY wasn’t a payment option on sites run by Alibaba Group Holding Ltd., which in 11 days racked up sales of nearly $85 billion, or 8.5 times the amount of digital yuan transacted over 18 months of trials.
Speaking at a November conference, Mu Changchun, who runs the e-CNY project at the People’s Bank of China, appeared to acknowledge the demand challenge. He said the e-CNY’s “acquiring environment” remains a work in progress and is a primary factor holding back a full-scale launch, along with issues related to completing the risk-management and regulatory frameworks.
A McKinsey report in October pointed to e-CNY as an example of how official central-bank-issued digital currencies “have been met with only moderate adoption.” While the trials show that the e-CNY actually works, the McKinsey report said, they compare with more than two billion monthly active users reported by WeChat Pay and Alipay.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
