The driving force and development opportunities of DC/EP

Zhou Xiaochuan used data to illustrate the development of mobile payment. In 2019, mobile payments accounted for more than 60% of personal consumption expenditures. In 2020, the number of mobile payment users in China will account for nearly 60% of the total population, which is already relatively high. At present, the large-amount micro-payment system composed of mobile payment, various electronic payments, and credit cards has already accounted for about 15% of the total.

Banking business began to be fully digitized 20 or 30 years ago. Accounts are all entered into computers and are processed digitally. Later, all communications are also digitized. In this case, the banking business is largely a data processing business. Therefore, whether it is digital currency or data processing, it should be regarded as digitization in a broad sense. Of course, there are also people in the world who want to put it in a narrower sense.

What are the driving factors for the R&D, piloting, and possible future promotion of digital RMB? What are the development opportunities? This is also the focus of the industry’s most concern. In this regard, Zhou Xiaochuan also expressed his views.

First, the driving force mainly comes from the demand side, including continuous improvement of the payment system, especially the efficiency requirements of the retail payment system, as well as reducing costs, improving convenience, and better serving users. Of course, this also provides the possibility for continuous technological advancement. Technological innovators will also promote their own technology, but the demand side is still the mainstay.

For example, in blockchain technology, the central bank has always reminded the demand side to have a clear head. Blockchain technology has the benefits of decentralization, but is decentralization really what we really need for the modernization of our payment system? In fact, it is not necessarily true, and it will bring a lot of drawbacks if it is not done properly. It may be that the blockchain technology has the immutability of records, which is also a very useful technology, but the existing systems, especially the account system, are actually very unlikely to be tampered with, and the probability of occurrence is also very low. In addition, we must also consider the issue of active modification in case of transaction errors.

Another example is that there are some technical claims that you can not rely on an account. Is an account a bad thing? If you think about it, accounts in the financial system are actually good things. There is also an emphasis on digital transaction encryption technology. Looking back on the progress of electronic payments in the past two to three decades, many things are indeed encrypted, but the encryption links are different. Some are encrypted during account access, and some are encrypted during information transmission.

In the end, it is necessary to rely on the collision of technology and demand to arrive at a better development idea.

Secondly, Chinese people used to bring a lot of things when they traveled. Some people even made up the formula “skills for money”, saying that one should bring an ID card, second, a mobile phone, and third, a house key, and some cash. After the emergence of mobile phones as mobile Internet terminals, people found that they just need to bring their mobile phones when they go out. ID cards, bank cards, and health treasures are all in the mobile phones. Maybe car keys and door keys are also in the mobile phones. Mobile phones have many other functions, such as Watch news and entertainment. Therefore, people don’t necessarily want to bring cash, credit cards, etc., but hope that all these things can be integrated, which is also a big motivation.

After the further development of technology, there may be newer and more convenient things, but this is the case in China at this stage. These needs are in different countries, because the foundation is different, and the intensity of demand is also different.

Third, consumers accept new payments, what about retail stores? Before mobile payments, China could already use the Internet to acquire orders. To further develop Internet acquisitions, shops can use different methods, such as entry payment, NFC (Near Field Communication, NFC for short), and QR codes. Recently, DC/EP also introduced that transactions can be completed through NFC and the touch of a mobile phone. This is a kind of peer-to-peer (peer to peer) payment. With the improvement of network infrastructure, most places will be supported by the Internet, especially wireless networks. In case there is no internet, there is still a method like NFC to complete the payment.

Fourth, the second-tier commercial institutions in the two-tier system, including commercial banks, mobile phone operators, and payment platforms, should encourage reasonable competition among them, jointly provide services and innovate. In Zhou Xiaochuan’s view, the central bank is best not to pre-set or determine a certain technological route, because technology is constantly being updated, and it is not easy to judge when this kind of technology is progressing very fast.

There are also many discussions in the world, pointing out that special attention should be paid to the issue of financial disintermediation, especially the potential risks of financial disintermediation in second-tier institutions. Another risk is to prevent excessive price fluctuations of some virtual assets, speculation, and separation from the real economy. China attaches great importance to finance to serve the real economy. If some financial transactions are separated from the real economy, people will often raise question marks.

Fifth, the protection of personal privacy should be highly emphasized to prevent telecommunications and payment fraud. In China, telecommunications fraud has attracted much attention. The proportion of fraud through mobile phones and other methods in China is very high, and people are also very dissatisfied with it. This is also the driving force for the development of digital RMB.

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