In a recent turn of events, Chinese central bank digital currency (CBDC), digital Yuan, has proceeded to a progressive move. Reportedly, Chinese state-owned banks are set to lead efforts to integrate digital Yuan with government-issued social security cards.
According to local media reports, a Chinese ministry had shown interest in the concept late last month after which the news spread. The Chinese Ministry of Human Resources and Social Security said it wanted to “explore and promote” ways to “add digital Yuan payment functions” to the cards.
The plastic cards are used as a form of identification in banks and government offices and some already have smartcard functionality. However, Beijing is keen to issue new, upgraded “third-generation” cards that will let citizens, particularly the elderly and those living in rural areas, make digital Yuan payments with their cards.
Sources reveal that the idea to make digital Yusn accessible for senior population comes in light of the fact that smartphone ownership figures are relatively low among older and rural populations. Additionally, many individuals in these demographics are also unbanked.
According to media reports, the local banks have started showing interest in the concept and a number of “commercial banks” have already “begun to explore” the notion of adding digital Yuan functionality to new social security cards. Among the participating banks, there is the Bank of China, one of the country’s biggest state-run commercial banks, along with those given permission to issue social security cards with bank card-like functions back in 2018.
However, the Bank of China is now working on a “third-generation” solution that will involve issuing cards that can double as digital Yuan wallets. Li Xin, the Chief Business Manager of the bank’s Digital Currency Office, appreciated the technology behind the digital Yuan and said:
The digital Yuan is highly efficient, convenient, stable, safe, and widely applicable. It naturally fits with the new requirements of a social security system that covers the whole populace, in both urban and rural areas.
Additionally, he revealed that the solution involves not only “physical cards,” but also “bracelets, portable tags, and more.” Reportedly, the bank also plans to expand the usage scenarios of the new “wallet cards” to payments and micropayments.
Tackling the problems of digital divide, these cards, fobs, or wearable “wallets” will allow citizens to pay their bills, pay on public transport, settle medical bills at hospitals, and even receive pension payouts and other benefits. Li Xin claimed:
The deep integration of the digital yuan in the social security [system] is in line with current trends and the development of the digital economy.
Notably, China has been leading the CBDC development and adoption at the forefront and intends to leave no stone unturned. With the integration into wallets and social security cards, the CBDCs would further reach a larger population otherwise deprived of other technological facilities.
In a similar attempt, Jinan, capital of Shandong Province, has enabled all of its bus routes to accept payments in the form of the CBDCs. Similarly, Jiangmen in Guangdong Province completed a full upgrade of its bus network to incorporate digital Yuan payments, while Qingdao piloted network- and electricity-free digital Yuan transactions on its metro system.
Notably, China’s escalated efforts to foster the CBDC adoption has motivated the integration in all sectors. In April, Changshu, a city located in Jiangsu Province, announced that civil servants will be paid in digital RMB or digital yuan from May 2023. Similar is the scene in the case of digital payments and online shopping.
According to local media reports, in Changsha, another Chinese city, more than 420,000 merchants accepting payments in the digital Yuan. Additionally, WeChat Pay, a popular Chinese mobile payment and digital wallet service added digital Yuan for fostering digital payments and in large the CBDC adoption.
While China’s efforts for fostering the CBDC adoption has been remarkable, the recent ideas are worth the appreciation. With the inclusion of social security cards and other offline gadgets, the nation has found the much awaited solution to the issue of digital divide and accessibility which could further motivate others nations to take similar steps.
