China, Goldman Sachs, Alibaba, DCEP, Digital Payments

The digital yuan, China’s planned national virtual currency, would account for 15% of total consumption payments in 10 years, helping commercial banks gain more ground from fintech companies, according to a Nov. 17 Goldman Sachs report shared with CoinDesk.

The Digital Currency Electronic Payment (DC/EP) could be a more attractive alternative to existing digital payment services provided by fintech companies in a cashless environment, said the 81-page report. It cited anonymity enabled by the separation of a bank account and the digital yuan wallet, offline payment and interconnectivity with various payment options as contributing to the digital yuan’s success.

“In 10 years we expect DC/EP to reach 1 billion addressable users, 1.6 trillion rmb ($229 billion) in issuance, 19 trillion rmb ($2.7 trillion) in annual Total Payment Value (TPV) and account for 15% of total consumption payments,†the report said. 

Goldman Sachs said consumption payments – meaning the transactions in which users make purchases via a digital payment platform – will be where banks and fintech providers compete most aggressively.

“Consumption is the major source of income for [third-party payment] (3PP) providers given the higher take rate than transfers and finance; thus consumption payments are regarded as ‘commercial payments’ by payment institutions,†the report said. 

Leveling the playing field

The report came after China’s top financial regulators halted Ant Group’s record-setting initial public offering. The company, which is the fintech affiliate of China’s IT giant Alibaba, has one of the most popular digital payment mobile apps Alipay. Beijing’s authorities also proposed a set of new anti-monopolistic practices to rein in fintech companies in the country.

The adoption of the digital yuan will likely slow the rate that banks have been ceding ground to fintech, and even reverse market share losses over the long-term if DC/EP gains in popularity, the report said.

The report noted China Merchant Bank (CMB) and Ping An Bank (PAB) may be among the beneficiaries from the new digital payment ecosystem, as third-party payment platforms would have to face more competition in the long term.

“A 10% increase in the bank app users would lift revenues by 2%-5%,†the report said. “PAB and CMB are best placed to commercialize returning app users given their leading retail franchises, premium client bases, superior fintech capability and strategic focus on retail finance.â€

Currently, Alipay and Tencent’s digital payment arm WeChat Pay still dominate China’s digital payment industry. The two companies account for over 90% of mobile banking transactions in the last three months of 2019. 

“Commercial banks will be the only institutions permitted to operate in DC/EP exchange as it is the digitalization of legal tender,†the bank noted. “This will effectively level the playing field with fintech platforms, enabling banks to once again compete head-to-head with them in consumption payments.â€

Fintech growth

However, fintech companies will still be focused on retail banking services, taking large shares of growth in the retail financial services market in the next five years as the central bank gradually increases the adoption for the digital yuan.

“Over the next five years, we expect Fintech to grow revenues at almost double the rate of banks as they continue to capture incremental market share across the retail finance ecosystem,†the bank said.

The report also notes DC/EP would not disintermediate the commercial banks since the virtual currency is replacing cash rather than savings. In addition, the digital yuan wallet will not pay interest to depositors and most of the transactions will be in small amounts, the report said.

According to the report, China has 900 million mobile internet users as of 2019, making up over 64% of its population. The country’s M0/M2 ratio is only 4%, which is one of the lowest cash usage among major economies and it is still declining. Ninety-six percent of Chinese banking services are processed on electronic devices.

The bank forecasts a 3 trillion rmb ($428.6 billion) revenue pool for retail finance by 2025 (excluding mortgages) as growth in payments and retail lending slows but wealth management and insurance agencies remain brisk.

Read the full report below:

Du lịch nhật bản, hướng dẫn du lịch Nhật và đánh giá địa điểm Nhật Bản Japan travel news, japan travel guides, japan holiday destinations and japan reviews

RELATED NEWS

Report: Document Shows Specific Bitcoin Miners in Xinjiang Instructed to Shut Down

An official notice stemming from the Changji prefecture government in Xinjiang details that officials from the Zhundong Economic-Technological Development Park must instruct bitcoin miners to shut down. China’s province of Xinjiang is a highly concentrated region of bitcoin miners and bitcoin activities at the park must cease by June 9, according to the document. Nevertheless, […]

Xem chi tiết: Report: Document Shows Specific Bitcoin Miners in Xinjiang Instructed to Shut Down

Hong Kong to Connect Digital Yuan With Domestic Payments System in Cross-Border Trials

Financial authorities in Hong Kong have announced a second phase of trials for mainland China’s digital currency. As part of the upcoming tests, the city will link the Chinese digital yuan to its domestic payments system to evaluate the CBDC’s usability in cross-border scenarios. Hong Kong Residents to Load E-CNY Wallets via Mobile Phones China […]

Xem chi tiết: Hong Kong to Connect Digital Yuan With Domestic Payments System in Cross-Border Trials

While China’s Bitcoin Miners Flock to Central Asia Canaan Sets up ASIC Mining Rig Service in Kazakhstan

On Monday, the application-specific integrated circuit (ASIC) manufacturer Canaan Inc. announced the company has established an overseas after-sales center in Kazakhstan. According to Canaan, the service center will provide local customers with after-sales services like machine testing, warranty services, maintenance, and technical consultation. Chinese Miners Are Focused on Relocation, Canaan Opens Mining Rig Service Center […]

Xem chi tiết: While China’s Bitcoin Miners Flock to Central Asia Canaan Sets up ASIC Mining Rig Service in Kazakhstan

Goldman Sachs Survey: Chief Investment Officers Say Bitcoin Is Their Least Favorite Investment

Investment bank Goldman Sachs recently held two roundtable sessions for chief investment officers of hedge funds. The bank found that they see bitcoin as their least favorite investment. In contrast, the latest Bank of America Fund Manager Survey found that “long bitcoin†was the most crowded trade. CIOs Reveal Their Most and Least Favorite Investments […]

Xem chi tiết: Goldman Sachs Survey: Chief Investment Officers Say Bitcoin Is Their Least Favorite Investment

Weibo Cracks Down Crypto Related Accounts as China Strengthens Its Anti Crypto Stance

Sina Weibo, the Chinese equivalent of Twitter, banned the accounts of several key cryptocurrency and defi influencers in the country yesterday, according to reports from local sources. This might be a continuation of the anti-crypto stance the Chinese state has been exerting since 2013, and more profoundly in the last days with the crackdown of […]

Xem chi tiết: Weibo Cracks Down Crypto Related Accounts as China Strengthens Its Anti Crypto Stance

Shanghai to Hand Out $3 Million in Digital Yuan Lottery

As part of government efforts to get the digital yuan going, authorities in Shanghai will distribute $3 million worth of the central bank-issued currency among residents of Shanghai. The digital money will be dispersed through a lottery, a method that has already been implemented elsewhere in China. Lottery Winners to Get 350,000 Digital Red Envelopes […]

Xem chi tiết: Shanghai to Hand Out $3 Million in Digital Yuan Lottery

Amundi Executive Pascal Blanque Calls Cryptocurrencies a Farce

Pascal Blanque, CIO of Amundi, one of the biggest asset managers in Europe, has stated that bitcoin and other cryptocurrencies are a farce, exposing its skeptical stance on the real value of cryptocurrencies. The investor stated that crypto assets are an expression of markets making bubbles and that investors should focus on other more logical […]

Xem chi tiết: Amundi Executive Pascal Blanque Calls Cryptocurrencies a Farce

Beijing to Disperse $6 Million in Digital Yuan in a Red Envelope Lottery

China’s central bank digital currency (CBDC) continues to gain further ground as the Beijing Local Financial Supervision and Administration Bureau revealed 40 million worth of the country’s digital yuan ($6.3 million) will be distributed to Chinese citizens. Beijing and China’s Central Bank Launches Digital Yuan Lottery The People’s Bank of China (PBoC) and Beijing Local […]

Xem chi tiết: Beijing to Disperse $6 Million in Digital Yuan in a Red Envelope Lottery

Canaan Expects $250M Revenue in Q2 — Yields and Mining Rig Deliveries to ‘Increase Substantially’

Beijing to Disperse $6 Million in Digital Yuan in a Red Envelope Lottery

Canaan Expects $250M Revenue in Q2 — Yields and Mining Rig Deliveries to ‘Increase Substantially’

Tiger Brokers and Futu to Offer Crypto Trading Services Outside China

Central Bank of Brazil Issues Guidelines for Its CBDC

Sichuan Energy Officials Plan to Meet in June to Discuss Bitcoin Mining Implications

Amid Stern Warnings from China Crypto Firms Huobi and Okex Halt a Few Services

Bitcoin Mining Operations Btc.top and Hashcow Cease Offering Services in China

Other Articles