The Bank of China is revolutionizing offline payments by integrating its digital yuan app with specialized “super SIM cards” with near-field communication capabilities. This innovative payment method aims to enhance the usability of China’s central bank digital currency (CBDC).
The Bank of China announced its partnership with China Telecom and China Unicom on July 10. These are two major telecommunication operators in China. The following day, the bank initiated testing for the new offline payment system. This strategic alliance paves the way for users to conveniently make phone payments using the digital yuan app integrated with “super SIM cards.”
Integration of Digital Yuan App with SIM Cards
Importantly,the Bank of China empowers users to perform phone payments effortlessly. This is as a result of the integration of the digital yuan app with specialized SIM cards equipped with near-field communication capabilities. The payment process simply requires users to bring their mobile phones near the point of sale terminals. This therefore eliminates the need to power on their devices.
Furthermore, this integration allows transactions to be processed even when the phone is turned off. Notably, the SIM card payment functions will initially be accessible only on specific Android phones in selected test regions across China.
Meanwhile, the People’s Bank of China launched a trial version of the app in January 2022. This further highlights the country’s commitment to advancing digital currency solutions.
Expansion of Digital Yuan Use Cases
China has been actively expanding the use cases for its CBDC. These use cases are parts of its Belt and Road Initiative and cross-border trades. The government also has plans to extend the utilization of digital yuan to pay taxes and utility services within the country. This will be in addition to the offline payment system trials.
As a recent development, passengers in the city of Guangzhou can now pay for public bus rides using the digital yuan on 10 transit routes. The process is simple. Passengers need to download the digital yuan app, deposit funds, and scan the QR code in the bus payment section to pay for their ride.
This integration of digital yuan payments in public transportation further demonstrates China’s commitment to fostering a cashless society.
Hong Kong’s e-HKD Pilot Program
Taking cues from China’s initiatives, Hong Kong launched an e-HKD pilot program in May. The Hong Kong Monetary Authority (HKMA) released a white paper in October 2021, exploring the potential of a retail CBDC. In a consultation paper published in September 2022, the HKMA expressed its intent to explore cross-border payments that link the digital yuan and the e-HKD.
This forward-thinking approach showcases Hong Kong’s dedication to embracing digital currencies and exploring innovative cross-border payment solutions.
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