Can Alipay and WeChat Pay converge with the e-CNY?

Written by Kapronasia || September 12 2023

Despite high expectations for China's digital currency, adoption of the e-CNY for retail payments in the country remains modest at best. A key issue, and one we have been discussing for several years now, is interoperability with the existing, very effective digital payments ecosystem. The e-CNY is unlikely to be more than a novelty unless it can be fully interoperable with Alipay and WeChat Pay.

The Chinese government seems to have realized that it is stuck with the fintech giants, for better or worse. There really is no alternative to their respective ecosystems, and a digital yuan siloed in a dedicated wallet that does not sync with Alipay and WeChat Pay will probably fizzle out, except within certain parts of the state economy where the government pushes salaries to be paid in the e-CNY and workers use those payments at specific points of sale.

No wonder that Mu Changchun, head of the Digital Currency Research Institute, the central bank agency responsible for developing the digital yuan, said at a recent forum that the digital yuan should eventually be a payment option across “all retail scenarios.” Though Mu did not mention Alipay and WeChat Pay specifically, the implications of the comment are clear.

Both of the fintech giants have already integrated the digital yuan with their respective apps, Alipay in May 2021 and Tencent in January 2022. The e-CNY app also added WeChat Pay as its second “express payment” option in March, nearly three months after initially having Alipay as an option on its own app.

So integration is happening, but gradually, and not seamlessly. We imagine that what the PBOC has in mind is a single, unified and standardized QR code that supports e-CNY payments as well as Alipay, WeChat Pay and existing electronic payment methods. In theory, it would make using the e-CNY easier for consumers to use and for merchants to accept. Part of the problem is that people don’t always know where they can pay with the CBDC. If all retail outlets start using the aggregate QR code, that could quickly expand the options for the digital renminbi.

However, there is a risk that such a payments system would see Alipay and WeChat Pay lose market share as the point of a unified QR code is total integration. Both of the fintech giants have thrived to date thanks to their respective moats and siloes.

Yet the PBOC keeps saying that the e-CNY is not intended to compete with Alipay and WeChat Pay. Instead, it is intended to replace paper bills and coins (though that’s what the existing e-wallets do as well).

It will be interesting to see if adoption of the digital yuan significantly picks up, and if so, how Alipay and WeChat Pay respond. China's digital currency in circulation reached RMB 16.5 billion at the end of June, just 0.16% of the country's M0 money supply (cash in circulation).