China’s central bank digital currency (CBDC) needs to be made “more appealing and more user-friendly” in order to “satisfy market needs” and boost adoption, the public official most closely associated worldwide with the high-profile project has said.
The People’s Bank of China (PBoC) is at an advanced stage of rolling out the digital yuan (officially known as the e-CNY), putting the world’s most populated country well ahead of most other major nations when it comes to a state-backed digital currency. Its progress is being watched closely given China’s size and significance.
Changchun Mu, who is director of the PBoC’s Digital Currency Institute, discussed the CBDC’s journey as part of a panel discussion hosted by the Bank for International Settlements (BIS) in Switzerland on 22 March.
The number of CBDC digital wallets downloaded in China had reached 140 million in early November 2021, with the number reportedly reaching almost double that number just a few weeks later. But despite ongoing introduction of initiatives to encourage people to use the CBDC, a growing number of reports in recent months have focused on highlighting disappointing take-up.
The e-CNY app had, Changchun Mu told the event audience, been “iterated” over 19 versions since last year “to satisfy market needs”.
“Every day we are collecting comments from every source of feedback, including social media, the app markets and even the call centres – especially the negative ones [feedback]. And we know that users hate us,” he said. “But we have to collect all those negative comments, upgrade our apps to make them more satisfactory for the users – and then make the hate go away,” he added, triggering (warm) audience laughter.
Offline functionality challenge
“I remember a slogan from [Finnish mobile-phone company] Nokia – ‘connecting people’. We share the same value in our CBDC system and developments. The users and people will be always the centre of our system,” Changchun Mu told the audience at the two-day ‘BIS Innovation Summit 2023: Technological innovation in an age of uncertainty’ conference.
He was speaking alongside senior representatives from the central banks of the US, Spain and Chile on the topic of ‘The process of technological innovation at central banks’, with much of the session comparing innovation in the public sector with innovation in the private sector.
Changchun Mu – who was included in Global Government Fintech’s ’23 people to watch in 2023’ and features regularly at international gatherings discussing fintech, digital money and related trends – reflected that although the PBoC was able to become more ‘market-oriented’ it “cannot be more profit-oriented” (like any central bank).
The challenge of enabling CBDC for offline payments – a challenge for CBDC designers across the world – was also mentioned.
“[There are] some functions, for example the offline function – which is actually not profitable in the Chinese market – but we have to develop that function because we want to make our CBDC a universal payment instrument that could be used 24-7, whenever and wherever,” he said.
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‘Red packets’ to ‘meet market requirements’
Mindsets within the public sector towards innovation was one of the prominent cross-cutting topics discussed by the panel.
“We have witnessed some encouraging results so far […] in that the culture change in my organisation – which is DCI – [has] become more market-oriented,” said Changchun Mu.
“For the development of CBDC we have to co-operate with the private sector and we have to co-develop the system with the private-sector, including PSPs [payment services providers], commercial banks and even telecom operators,” he said. He acknowledged that state authorities “cannot make a mandatory request that every citizen has to use our CBDC instead of other electronic payments”.
He referred the PBoC’s recent addition of a feature in the digital yuan’s mobile app to allow customers to send ‘red packages’ electronically – a move inspired by the Chinese tradition of wrapping cash in red packets and giving them as gifts to friends and family during festivities (the red colour symbolises good luck). Payments companies Alipay and WeChat Pay already offer an electronic red packet feature.
“We launched our red P2P [peer-to-peer] packets function before the Chinese New Year holiday to meet market requirements,” he said.
Global Government Fintech’s Digital Currencies topic section
China’s digital yuan serving up CBDC ‘roadmap’: fintech expert – our news story (7 April 2022) on a webinar ‘Digital Currencies in Asia: Lessons for Europe’ during which Shanghai-based author and fintech consultant Richard Turrin described China as being a decade ahead of territories such as the US and the Eurozone when it comes to CBDC
Digital yuan accounts hit 140 million: PBoC official – our news story (9 November 2021) on digital wallet download numbers
Digital yuan “technically ready” for international use as project “prudently advances” – our news story (21 July 2021) on the PBoC issuing an update on its CBDC progress
Digital yuan is “back-up” to private payment platforms, says PBoC – our news story (26 March 2021) on Changchun Mu saying that China’s CBDC was needed as a ‘back-up’ for the country’s retail payments system and would co-exist with private payments platforms