China has been working on the digital currency since 2014, and finally, it launched the digital yuan application after doing many trials in different cities now. It is accessible to 23 cities which means now citizens from these pilot cities can download the application and start using the digital yuan here as payment. When the cryptocurrency (bitcoin) came in 2008, it was a new term.
With its high gaining popularity, it became difficult for china to control the frauds, tax evasions, and exchange of illegal goods because there is no tracking system in this currency. The main objective of creating digital currency is to replace the physical currency from China so they can track the spending of every person living in china. But the question arises, will digital yuan replace the entire money of physical cash from China because there are already giant online payment applications available.
The biggest challenge for the Chinese government
There are two big players in the Chinese payment system in recent times: Alipay by the Alibaba group and WeChat pay by the Tencent company. There are over millions of preferred users of these applications. In India, the most prominent players are Google Pay, PhonePe, Paytm, Amazon Pay, Whatsapp Pay, etc., which also have millions of users.
So the digital yuan application is a different application launched by the government. It is the most prominent challenge for the Chinese government or China’s central bank to onboard the users from Alipay and WeChat to pay for the digital yuan application.
When you get addicted to some platform, it would be complicated for you to leave your comfort zone because you do not know how the new application will work or whether it will be easy to use or not? The challenge for the government is to take these users from their application to the digital yuan app by providing some incentive or with the right marketing strategies.
Reaching out to a broader audience
China is trying to reach a broader audience to achieve the goal of replacing physical cash from the country. It will only be possible when all the citizens of China will download the digital yuan app and start using it as their preferred payment method. Millions of people use the Alipay and WeChat pay applications for their regular transactions.
These users are the target users for the digital yuan application because they do online transactions, and the digital yuan is a digital currency. They will also love to use it. The goal can only be achieved when all the people use the application or digital yuan, and it is now launched in 23 cities in China where people can download and use it.
Incentives to attract citizens
Whether it is an eCommerce application or other application with the motive of making a profit, every new application has to do the marketing because they are new brands in the initial stage. They have to give the bonus, offers, and incentives in various forms to attract the target audience so the people can download the application and start using it. It takes a lot of budgets to reach the maximum number of people. Since the digital yuan application is newly launched, the government has also to give incentives, offers, or bonuses for installing the application and using it as a digital payment method.
The government launched the application as a trial in 2020 and 2021 to attract users and test the application’s bugs. It is finally established after testing in 23 cities in China, and people are also using it for digital payments. It also gave many incentives like 200 digital yuan free to spend by installing the application and creating an account on this application. And now, there are over 230 million downloads hit by the digital yuan application, which is a massive achievement for the government.
Onboarding the two digital giants
You already know that there are two digital giants’ payment systems: Alipay and WeChat Pay, that have massive user bases and are regularly using the payment services. But the government is trying to onboard this digital giant by making them partners. Tencent recently announced that their application, i.e., WeChat Pay, will accept digital yuan. Now you can use the digital yuan from the WeChat pay app. And Alipay is also showing as a partner and announcing using the digital yuan as the preferred payment system. The government’s primary goal is to get the user base of these two applications.