We know that China’s central bank, the People’s Bank of China, is getting ready to launch a Central Bank Digital Currency (CBDC). The rumors are that the launch involves four state banks and the leading digital payments organizations, Alipay, WePay and UnionPay.
Between them, the latter three account for 98% of online payments. Changes in 2018 mean that the central bank might find integration easier than you’d imagine.
Firstly, Unionpay is the Chinese card issuer. It’s the equivalent of VISA, except it is state-owned. Its Chairman was at the central bank for three decades. Prior to digital payments companies Alipay and WePay getting a foothold, Unionpay had a monopoly on digital payments.
But Unionpay deals with more than just card payments. Since 2018, Alipay and WeChat have agreements for barcode payments to be cleared via Unionpay, effectively giving the central bank oversight. This is for transactions that don’t involve bank accounts.
Secondly, an institution that hasn’t been mentioned in these rumors is the NetsUnion Clearing Corporation. Online payments processed by the likes of Alipay and WePay, which involve a bank account are cleared through this centralized organization initiated by the People’s Bank of China. This also came into force last year.
We believe these two changes, apart from giving the central bank increased oversight, will make implementing a CBDC easier. It provides two key integration points.