Digital Currency Electronic Payment: Not A Warning Sign For Alipay And WeChat Pay

In a story that has reverberated around the world, the Chinese government has executed a new type and scale of project with the launch of the Digital Currency Electronic Payment (DCEP), apparently aiming to digitize circulated cash and assimilate payment methods from local tech giants, including Alibaba-backed Ant Group and Tencent. The project allows the public to save their digitized bills and coins in a separate state-designed app.

Blockchain, Technology, Exchange, Security

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Since DCEP has been implemented in several testing cities – such as Shenzhen, Suzhou, and Chengdu – this money is already widely accepted by many local merchants. For example, some employees working in governmental facilities have already received their paychecks in the digital yuan. The successful implementation highlights the upcoming era with new digital payment methods in China. Let us take a closer look at the new buzzword and its competitiveness to explain why the Alibaba-Tencent duopoly in the Chinese e-payment market is not likely to be shaken by the brand-new state project.

Power of DCEP in the payment market is yet to be determined

It is not hard to see that DCEP is the main competitor of third-party payment providers – they all provide similar services. Merchants will not have to pay commission fees for digital transactions once DCEP is deployed, causing interruptions to the third-party retail payment market.  Thus, small payment providers will see more adverse impacts on their business due to a highly competitive scenario brought by this new project.  As for large providers, like Ant Group's Alipay, their impacts will not be as devastating. Tencent's WeChat Pay might be impacted a little more, as its scope of financial services is narrower.

The fundamental strength leveraged by these two giants is their multiple affiliates, such as large e-commerce platforms, and social media-linked consumer bases, which interlink personal finance accounts with the companies' back-end systems. These accounts with comprehensive services and products make them hard to substitute. For example, apart from e-payments, Alipay has analytical and investment tools in various fields, including funds, insurance, wealth management and credit services. It also has Zhima Credit (Chinese: 芝麻信用), a credit assessment tool that works in many aspects similar to FICO,  offering credit scores as references for online shopping and all the financial services within the platform. These additional financial services are beyond DCEP's realm – which is only the realization of digital payments.

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