CITIC Securities released a research report saying that the promotion of digital RMB as a payment infrastructure in the digital economy era is the general trend. Based on the characteristics of digital RMB, users’ payment habits and mobile payment market pattern may face the opportunity of reshaping. The active participation of various manufacturers is expected to bring more imagination to the promotion and application of digital RMB. Digital RMB has the technical conditions for cross-border use, and is expected to extend from retail to cross-border payment in the future, so as to strengthen the international competitiveness of RMB in combination with the first mover advantage. With the continuous promotion of digital RMB application, relevant industrial chains are expected to continue to benefit. It is suggested to pay attention to the service providers related to Hard Wallet manufacturing, supporting transformation of collection equipment & acceptance terminal, construction of commercial banking system and security technology.
The main viewpoints of CITIC Securities are as follows:
Digital RMB e-cny: payment infrastructure in the era of digital economy, the general trend of promotion.
Legal digital currency is a better way to improve efficiency, reduce payment costs and strengthen government centralized management. Under the multiple trends of the objective law of currency development, the change of payment environment and the upgrading of digital technology, legal digital currency is expected to become the payment infrastructure in the era of digital economy and the general trend of promotion. The digital currency issued by the Central Bank of China is named e-cny. It is positioned as the retail payment infrastructure in the era of digital economy. It is operated by designated operating institutions. Based on the generalized account system, it supports the loose coupling function of bank accounts. It is equivalent to physical RMB and has valuable characteristics and legal compensation. At present, the pilot of e-cny is advancing steadily, and its popularization and application will be accelerated in 2021.
Operation & Technology System: centralized management, two-tier operation architecture, seven features + hybrid architecture open application space.
E-cny is positioned as a partial replacement of cash in circulation (M0), which combines the advantages of cash and electronic payment. Further, it adopts centralized management and two-tier operation system of issuance layer and circulation layer. E-cny has seven application characteristics: both account and value characteristics, no interest calculation and payment, low cost, payment and settlement, controllable anonymity, security and programmability. Digital RMB does not preset a technical route and supports a hybrid technology architecture, which means that more application innovation scenarios are expected to be born around the technical characteristics of e-cny, which are expected to bring new business models and market opportunities.
Positioning evolution: it is expected to extend from retail to cross-border payment, improve the efficiency of cross-border settlement and promote the internationalization of RMB.
At present, swift, together with China’s cross-border payment system CIPS and China’s modern payment system CNAPS, constitute China’s cross-border payment system, which is also the international general financial message service standard. The Central Bank of China takes the lead in promoting digital currency among the world’s major economies. Its loose coupling of bank accounts and the characteristics of payment as settlement may help RMB cross-border payment reduce its dependence on swift system and improve the efficiency of cross-border settlement. Combined with the first mover advantage, it is expected to strengthen the international competitiveness of the people’s currency. According to the white paper on the research and development progress of China’s digital RMB issued by the central bank, digital RMB has the technical conditions for cross-border use, but it is currently mainly used to meet the needs of domestic retail payment. At present, the research and development test of cross-border payment scenario is advancing in an orderly manner.
User habits, market pattern or face remodeling, and the business potential of scenario application is large.
1) Soft Wallet: the operators of digital RMB app are diversified, the application scenarios of soft wallet are constantly enriched, and the use experience is gradually close to the current electronic payment tools. As the payment flow entrance, it can help commercial banks expand the market share of retail payment, and commercial banks are also expected to promote more value-added services around the digital RMB payment entrance.
2) Hard Wallet: Hard Wallet realizes digital RMB related functions based on security chip and other technologies. CITIC Securities believes that there are opportunities to reshape users’ usage habits and mobile payment market pattern in other forms of hard wallet, such as card, mobile terminal and wearable device Service providers have the motivation to participate in the entry to strive to grasp the new traffic entry and operation scenarios. The active participation of various manufacturers will bring more imagination to the promotion and application of digital RMB.
3) The Winter Olympics has become a key node for e-cny promotion, and scenario based applications are expected to continue to develop in the future.
Risk factors: the promotion of digital RMB policy is slower than expected, and the offline infrastructure construction is less than expected.
Post time: Mar-14-2022