Digital Yuan Tries for Olympic Gold
- By Lachlan Colquhoun
- February 13, 2022
Host countries use the Olympics to showcase other non-sporting aspects of national achievement.
While not all of them have been as overtly political as Hitler’s use of the 1936 Olympics, other nations see the event as an opportunistic exercise in soft power.
With China now hosting the Winter Olympics and geopolitical issues to the fore, it is perhaps unsurprising that President Xi Jinping and his regime are pushing China’s credentials as a world power. In this case, the focus is on digital currency.
In a direct challenge to global payment giants, such as Visa — an Olympic sponsor — and Mastercard, China has been rolling out its digital yuan – or e-CNY – for Olympians and visitors as part of a national pilot that began in October last year.
More than 260 million people already have e-CNY accounts, and total transactions across 11 Chinese cities are up to around USD14 billion, according to the People’s Bank of China.
Download the app
At the Winter Olympics, consumers can download a digital yuan app and store the funds on their smartphones, physical cards, or wristbands which they can swipe to make payments.
The PBOC is running the trial and has made the app available on iOS and Android phones.
The Winter Olympics will be the first time international visitors can use the e-CNY. Several kiosks or service desks at the event teach visitors how to download and use the currency.
Visitors can use digital cash in the competition zones and for a range of services such as transport, catering, accommodation, and shopping.
“What’s the difference from using my Visa card then”
The Wall Street Journal has interviewed several international visitors to the Olympics on their experience with the e-CNY. The response has been lukewarm, highlighting the challenges the PBOC has ahead of it as it seeks to promote the use of the new currency.
One Dutch Olympic committee representative, for example, told the Journal that she didn’t need to pay for a lot of items, and if she did, she’d just bring out her Visa card.
A technician working on the television coverage had the same response, saying, “what’s the difference from using my Visa card then.”
A third interviewee was at a gift shop at one of the Olympic venues. The proprietor complained that he hadn’t been told about the trial, so his shop was not equipped with the necessary payment terminals. Meanwhile, the shop can accept Visa payments and payments from Chinese tech companies Alipay and WeChat.
Challenges ahead
China seems to have big plans for the e-CNY, and it will be interesting to see how much traction it can get in a world where so many other payments are also going digital, and people are carrying less and less cash.
To a consumer, what is the real difference in the experience of paying in e-CNY or using a Visa card or a digital wallet provided by a non-Government tech company such as Alipay?
The difference at the Olympics is that the e-CNY is reportedly contactless, cutting out person-to-person contact partly for health reasons to reduce the risk of transmitting the Covid virus.
The PBOC says it tested the e-CNY in more than 400,000 Olympic-related scenarios. But it is not clear how many of these were used and what volumes for the new currency will be over the event.
Going forward, Chinese tourists traveling abroad will be able to use the digital currency as they travel, while countries which buy into China’s Belt and Road Initiative will be able to use the e-CNY for trade and investment.
It will also be rolled out in Hong Kong, as perhaps another factor in Beijing’s increasing control of the territory, in the first offshore location to trial its use.
Hong Kong’s Lan Kwai Fong entertainment precinct is reported to be one area where the e-CNY will be tested, and local merchants are enthusiastic. Allan Zeman, chairman of Lan Kwai Fong Holdings, told the South China Morning Post that the e-CNY was the “future of payments.”
Early days
While it is true that the use of cash is significantly on the decline, there is no evidence that the e-CNY – and any other of the proposed Central Bank Digital Currencies – are guaranteed success.
Consumers in Hong Kong and China’s Greater Bay Area, for example, often use two mobile wallets — one in yuan and the other in the Hong Kong dollar — and have been comfortable in switching between the two currencies without actually touching any cash.
The jury is out on whether pure market forces will be enough to drive adoption, given that other digital payment methods are already well advanced.
China and the PBOC, however, have different ways of persuading consumers. So, perhaps it will be regulation rather than the market which drives e-CNY adoption as the concept continues its rollout.
Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].
Image credit: iStockphoto/Artranq