China Finance Expo: The Latest Buzz On WeChat, MBridge & Digital Yuan
Internationalization of the RMB remains a major goal of the PBOC.
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Thank you to my friends at WeChat for inviting me to the China International Financial Exhibition, held in Shanghai.
On display were all the latest payment methods on WeChat, as well as some significant updates on the digital yuan and mBridge.
The big story for me was mBridge, but I’ll start with WeChat because it was the most fun! Trying new payment methods was a blast, and I have pictures to prove it!
1️⃣ WeChat Palm Payments
Pay by palm is coming to China on WeChat and appears to be more widely accepted as a biometric means of payment than facial recognition. Facial scan payments seemed to have bothered some people and weren’t popular. There were some early complaints when they rolled out that people found them just a bit too eerie.
Below is an example of palm payments on a bus where a quick swipe of the hand is all that’s necessary. Practically speaking, it’s easier to put your hand on a scanner than your face! I used Alipay's facial recognition payments years ago, and I liked it, but was unimpressed. While they certainly worked well at checkout, I had to reposition myself in front of the camera to get it to recognize me, as I am taller than average.
2️⃣ WeChat “Lens”
Continuing on the theme of biometric payments, why not a retinal scan? WeChat is exploring biometrics across the board, and while connecting them to smart glasses may be a few years away, it worked well. Simply look, click, and pay, no cell phone required.
Now, the problem is that smart glasses shift the cost and adoption of offline recognition hardware to users, whereas palm-scan devices, while easier, require an investment in new point-of-sale (POS) terminals.
While this technology is still some years away, it is paving the way for AR technology, where you can pay or interact with a QR code through the glasses. It was fun to play with, even if I don’t plan on buying a pair of these glasses anytime soon.
3️⃣ mBridge MVP Transaction Volume
mBridge is a blockchain-based platform developed by the Bank for International Settlements (BIS) and central banks from China, Hong Kong, Thailand, the UAE, and Saudi Arabia, enabling real-time, peer-to-peer cross-border payments using central bank digital currencies (CBDCs).
MBridge is working in minimum viable product (MVP) mode even though it’s been relatively quiet. The representative from mBridge showed me their latest cross-border volume figures, which total around US$ 63 billion through April of this year under MVP. Frankly, that’s nothing to sneeze at, given that it’s not a finished product yet and the CBDCs are all in trial versions!
The transaction count is still small and all commercial:
60+ interbank transfers
150+ transfers in services
770+ transactions in goods trade
With the BIS withdrawing from mBridge, the supporting central banks are negotiating to spin it off into a standalone company. How much the five founding central banks will pay is uncertain.
What is clear is that mBridge has strong support from the PBoC and the Hong Kong Monetary Authority. MBridge is a perfect fit with Hong Kong’s digital currency strategy, and a solution to splitting mBridge off into an independent entity is coming.
4️⃣ Digital Yuan
The digital yuan was in the news at the conference, with the head of the People’s Bank of China announcing that the international use of the digital yuan would be expanded, a logical response to US stablecoins. He also announced that the digital yuan (e-CNY) would get a new international operations center in Shanghai.
I was overjoyed because I had finally obtained my very own e-CNY payment card. This is the physical card with a built-in wallet that can be used for making payments. I’ve always wanted one!!!
China is watching the US’s adoption of stablecoins, and I predict they will push digital Yuan internationalization in the coming year. PBOC Governor Pan also shook things up a bit with plans for a multi-polar currency system:
"Developing a multi-polar international monetary system will help strengthen policy constraints on sovereign currency countries, enhance the resilience of the system, and better safeguard global financial stability."
5️⃣ CIPS Growth Continues
CIPS is China’s version of SWIFT and it announced seven new participants at the event: Standard Bank, the African Export-Import Bank, First Abu Dhabi Bank, Kyrgyzstan's Eldik Bank, United Overseas Bank, and Bangkok Bank.
PBOC Governor Pan advocates for a multi-polar currency world, which implies a need for alternative transfer systems, such as the digital yuan and CIPS. Both are important elements of the PBOC’s drive to internationalize the RMB.
That CIPS is growing is a given as China continues to sell more of its exports in RMB. With a daily transaction volume around US$100 billion it isn’t going to threaten SWIFT but it does show that it works.
What CIPS did have was the coolest exhibit, featuring a big cube with a TV on every side!
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