If you need the original document, please log in to Future Think Tank to search and download it.
DCEP and its industrial chain
On September 24, Yi Gang, Governor of the People's Bank of China, said at an event celebrating the 70th anniversary of the founding of the People's Republic of China that the People's Bank of China's digital currency research has made positive progress and the People's Bank of China plans to convert the central bank's digital currency (Note: According to the previous central bank's Caliber, this DCEP) is combined with electronic payment tools, called digital currencies and electronic payment packages.
This report aims to explore the current business model and pattern of my country's electronic payment industry and related electronic authentication and financial network security industries, as well as the possible impact on it after the entry of central bank digital currency.
What is DCEP?
Central bank leaders frequently broke the news, saying that the central bank’s digital currency is “ready to come out.” On August 10, Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China (hereinafter referred to as the "central bank"), proposed at the China Financial Forty Forum that relevant central bank personnel have begun to develop relevant systems since last year. “Now we can say that we are ready to go.” Shortly thereafter, Mu Changchun became the director of the Central Bank’s Digital Currency Research Institute, and on September 4 he opened “Technology and Financial Frontiers: Libra and Digital Currency Outlook” on the knowledge payment platform. "course. The market originally thought that central bank digital currency was still in the conceptual stage, but recent frequent reports have greatly increased market expectations.
Fan Yifei, deputy governor of the central bank, and Mu Changchun, deputy director of the Payment and Settlement Department and director of the Digital Currency Research Institute, have repeatedly elaborated on the overview of my country’s central bank’s digital currency: From a positioning perspective, it focuses on replacing cash (M0); in terms of operating systems, Adopt a two-tier structure of "central bank-commercial bank/other institutions"; on the technical route, consider blockchain technology and do not load smart contracts that are not conducive to the performance of currency functions; only the real name of the central bank is given on the account, other than the transaction party Other entities are anonymous (including commercial banks or other institutions acting as distributing agencies).
DCEP was first proposed on March 9, 2018, by Zhou Xiaochuan, then governor of the Central Bank, at a press conference on the theme of "Financial Reform and Development" at the First Session of the 13th National People's Congress, and elaborated on the name. The legal digital currency developed by the central bank is "DC/EP" (DC, digital currency; EP, electronic payment). Compared with the general name CBDC (bank) for all central bank digital currencies previously proposed by central bank officials, this title focuses more on payments, which to a certain extent means that the main use of central bank digital currencies lies in three basic purposes: the function of currency. It is a "means of payment" rather than a "store of value" and a "measure of value."
What is the difference between DCEP and other assets?
The positioning of DCEP digital cash (M0) is the key to understanding DCEP, which is also the key to distinguishing it from other currencies. We compared the similarities and differences of asset forms such as DCEP, physical cash, third-party payment institution account balances, bank deposits, Bitcoin and gold from the perspective of digitization, debtor-related factors, distribution agency-related factors, and holders. relevant factor.
Why is DCEP issued?
An important reason for issuing central bank digital currency is that the existing physical cash system has several pain points. Fan Yifei, deputy governor of the central bank, proposed in "Some Thoughts on Central Bank Digital Currency" that "the necessity of digital currency is increasing day by day." Specifically, existing banknotes and coins have the following problems: (1) The cost of issuance, printing, production, recycling and storage is high, and the circulation system has many layers; (2) It is inconvenient to carry; (3) It is easy to be counterfeited, anonymous and uncontrollable , there is a risk of being used for illegal and criminal activities such as money laundering.
In addition, then central bank officials Fan Yifei, Yao Qian, Mu Changchun and others believed that the issuance of central bank digital currency would help adapt to the wave of the digital economy, create conditions for negative interest rates, curb public demand for private cryptocurrency digital currencies, and consolidate my country's monetary sovereignty.
DCEP may have usage restrictions
Since DCEP is safer than bank deposits, it may cause commercial banks to "move deposits", thus affecting the stability of the financial system. To this end, the central bank will limit DCEP and increase the number of bank deposits that can be redeemed for DCEP. Costs and institutional frictions. In addition, in order to guide holders to use DCEP in retail business scenarios, the central bank may also take corresponding measures. These measures may include:
Time and amount limits. The central bank can set transaction limits and balance limits based on DCEP accounts of different levels. It can also set daily and annual cumulative transaction limits and provide for large booking redemptions.
Transaction fee limits. When necessary, the central bank can implement tiered charges on DCEP exchanges. Small-amount, low-frequency exchanges may be free of charge, while large-amount, high-frequency exchanges and transactions may be charged higher fees.
These usage restrictions may result in value inequalities between DCEP and physical cash or other forms of fiat currency. We suspect that the over-the-counter trading market for DCEP may emerge, and the central bank needs to closely monitor related risks, which will create demand for technology companies in the financial risk control field. .
Mu Changchun mentioned another reason for restricting DCEP in the Get App course: anti-money laundering. He mentioned that the measures that the central bank may take include registering a wallet with a mobile phone number, and the DCEP obtained can only meet daily small payment needs; uploading an ID card or bank card can obtain a higher-level digital wallet. If you can go to the counter for an interview, there may be no restrictions.
The possible impact of DCEP on the electronic payment industry
Current status of the electronic payment industry: business model and competition landscape
my country's electronic payment models are mainly divided into two types: bank card payment based on POS machines and barcode payment based on QR codes (NFC sensor payment market share is small), both of which are internationally accepted "card issuer/code party clearing" "Agent" - payment account holder - merchant "four-party model".
QR codes can be thought of as "virtual cards". Whether it is a bank card or a QR code, its essence is an "account". The difference is that the bank card account holder is a bank, while the QR code account holder may not only be a bank, but also a third-party payment institution (the third party here refers to the party), such as Alipay and Tenpay (engaged in third-party transactions). Three-party payment business must obtain a license issued by the central bank). Due to the KYC ("Know Your Customer") policies of the two institutions, customer information is generally not shared.
The charging model of each institution is:
Acquirer: Charges acquiring service fees from merchants, and the price is adjusted by the market. For example, starting from January 2019, the acquiring service rate for Tenpay and Alipay is 0.6%;
Card issuer: Charge card issuance service fee from the acquirer, which shall not be higher than 0.35% for debit cards, not higher than 13 yuan for a single transaction, and not higher than 0.45% for credit cards;
Code-issuing institution: charges service fees from the acquiring institution (which may be a bank). For example, Tenpay and Alipay charge a 0.2% handling fee to acquirers;
Clearing agency: The service fee charged is the government-guided price, which shall not exceed 0.065%, and a single transaction shall not exceed 6.5 yuan. This part of the fee is borne 50% each by the payee's issuing bank/receiving bank and the acquiring institution (Note: There is currently no charge for Internet connection).
Another classification method of electronic payment is offline payment (via QR code or POS machine) and online payment (via App or web page). The clearing institution of the former is mainly UnionPay, and the clearing institution of the latter is mainly Wanglian (the central bank stipulates that inter-bank electronic payments must go through the clearing institution, and inter-bank clearing cannot be completed within the institutional system).) The transaction volume of the latter is approximately that of the former 1/5.
The possible impact of DCEP on the electronic payment industry
Overall impact is limited
According to the "Interim Measures for the Statistics and Publication of Money Supply by the Bank of China" (1994), my country defines currency as "financial instruments that undertake circulation and payment means" and divides the published money supply into three levels (M0, M1, M2 ), among which physical cash (notes and coins) belongs to M0, has the highest liquidity level, is a liability of the central bank, and does not pay interest; bank deposits belong to M1 and M2, has the second highest liquidity, is a liability of commercial banks, and pays interest; The balance of the third-party payment institution belongs to M2, which is a liability of the central bank and does not pay interest. The central bank’s digital currency DCEP is positioned as M0.
DCEP's M0 (cash) positioning may mean that its overall impact on the electronic payment industry may be very small to a considerable extent, because M0 already accounts for a very small proportion of my country's money supply. M0/M2 has been declining in recent years. Excluding the factors that increase M0 due to cash withdrawals in January or during the Spring Festival every year, M0/M2 rarely exceeds 10% after 1999; M0/M2 rarely exceeds 5% after 2013. The People's Bank of China issues currency based on the needs of the real economy and monetary policy. The continuous decline in the proportion of M0 largely means that the Chinese people’s demand for M0 is reduced.
We found that in recent years, when the amount of non-cash payment transactions (referring to online payments and mobile payments, and phone payments account for a small proportion of non-cash payments) has increased in volatility, the amount of cash withdrawals from bank cards has continued to decline, and was once negative. This also shows that people’s demand for cash transactions is gradually giving way to non-cash payments.
The carrier may be a QR code instead of a bank card, and ATM and POS manufacturers may need to transform.
Since barcode payment is more convenient than bank card payment (for example, there is no need to carry a card), the transaction amount of barcode payment has gradually increased in recent years, while the transaction amount of bank card payment has declined relatively. To a certain extent, it can be said that barcode payment has had an impact on bank card payment. The substitution effect is significant. Therefore, we judge that the main carrier of DCEP may be the QR code rather than the bank card.
Assuming that even if DCEP goes online, it will not have much impact on bank card issuance, then manufacturers that mainly produce ATM machines that support bank card transactions and POS machines that accept bank card transactions may need to further transform. In recent years, the number of networked POS machines and ATM machines mainly related to bank card transactions has fluctuated and declined. The launch of DCEP may have further negative impacts, and relevant manufacturers need to accelerate their transformation.
Considering that DCEP is more portable than physical cash (notes, coins) and safer than bank deposits, some physical cash holders may be inclined to exchange the physical cash in their hands for DCEP, but we expect that this demand will have a positive impact on ATMs. The impact is because we believe that the current circulation of physical cash is already very small, and it can be satisfied at bank branches.
Third-party payment companies may become distribution and clearing institutions
In addition to banks, there are also companies specializing in payment services in our country. They are called "third-party payment" companies and are subject to license management by the People's Bank of China (including fixed-line payment, Internet payment, mobile payment, and digital TV payment). Within the three major license categories of online payment, bank card acquiring, and prepaid card issuance and acceptance, 100% of customer reserves (customer account balances of third-party payment institutions) must be turned over to the reserve interest rate bank. The market believes that since the account balances of DCEP and third-party payment institutions have certain similarities (both are central bank liabilities, both are in electronic form, etc.), the launch of DCEP may have a certain substitution effect on third-party payments. We believe that in the two-level "issuance-issuance" operating system of DCEP "People's Bank-Commercial Bank/Other Institutions", the People's Bank of China currently does not clearly stipulate that institutions other than commercial banks cannot become DCEP issuers. Whether a third-party payment company can benefit from DCEP depends on whether it can be called a DCEP distribution institution. Third-party payment companies such as Tencent Tenpay and Alibaba Alipay are likely to have this opportunity because these institutions: 1) have rich C-side personal service experience; 2) have rich B-side merchant resources, which is conducive to the promotion of DCEP. Although DCEP is a legal currency and M0, it will not be rejected by merchants.
In addition, third-party payment companies are currently not allowed to carry out clearing business. If third-party payment companies are allowed to carry out DCEP clearing, it may squeeze traditional clearing institutions UnionPay and Wanglian. However, it should also be pointed out that according to the details of the 2 billion investment, 29 third-party payment institutions such as Alipay and Tenpay hold 63% of the shares. The impact of DCEP on this has yet to be further verified (Network Investment Details: People's Bank of China Clearing Center, 12%; China Banknote Printing and Minting Corporation, 3%; China Payments and Clearing Association, 3%; Shanghai Gold Exchange, 3%; Interbank Market Clearing House Co., Ltd., 3%; China Interbank Market Transactions Business Association, 3%; Wutongshu Investment Platform Co., Ltd., a direct affiliate of the State Administration of Foreign Exchange, 3%; Tenpay, a subsidiary of Tencent, 9.61%; Alipay, 9.61%; Online Banking Online, a subsidiary of JD.com, 4.71%; China Telecom subsidiary Tianyi E-commerce, 2.77%; Kuaiqian, 2.45%; Ping An Pay, 2.45%; Baidu Pay, a subsidiary of Baidu, holds 2.42%; United Medical, a subsidiary of Hailian Jinhui, holds 1.99%; China Mobile business, owned by China Mobile Held, 1.64%; UnionPay business, 1.55%; Tonglian payment, 1.28%; Yibao payment, 1.21%; SF Hengtong payment, 1.2%; Shanghai Huifu Tianxia data, 1.18%; NetEase, 1.1%; Shengpeitong, 1.08% ; Yi Zhidong, 1.06%; Midea Pay, 0.97%; Yinsheng Pay, 0.9%; Lakala Pay, 0.9%; UBS Credit Card, 0.9%; Xunpay, 0.86%; Lianlian Yintong, 0.84%; China Unicom Payment, 0.84%; Hanyin, 0.84%; Baofu, 0.83%; Huiyuan Yintong, 0.83%; Shande Payment, 0.81%; Smart Payment, 0.77%; Hainan Xinsheng, 0.75%; Quick Payment Tongtong, 0.75%; Huichao Pay, 0.71%; Vipshop Pay, 0.69%; Dongfang Electronic Payment, 0.68%; Alipay, 0.64%; Guofubao, 0.62%; Yilian Pay, 0.41%; Jeff Ruitong, a subsidiary of Xiaomi, 0.14%).
Little impact on the digital identity authentication industry
On December 25, 2017, the People's Bank of China issued the "Barcode Payment Business Specifications (Trial)", recognizing that digital certificates are a factor that has a significant impact on the determination of barcode payment limit levels. Only two types of digital certificates or electronic signatures are used. Banks and payment institutions that use the above valid elements to verify transactions can independently agree on single-day cumulative limits with customers through agreements. Other transaction limits are 500-5,000 yuan. The importance of digital certificates as user authentication is highlighted. In other words, in the era of barcode payment, digital certificates have become quite popular. We believe that the launch of DCEP may be beneficial to it, but the impact may be small. DCEP may also benefit other digital identity authentication methods.
标签： #Payments #Central Banks #Currencies #Banks #Cash
评论列表