A first-hand look at China’s new digital yuan wallet

The Industrial and Commercial Bank of China (ICBC) recently started allowing some of its regular customers to activate China's central bank digital currency wallet inside its mobile app.

There are now three ways for users to test out China’s digital yuan, also known as e-CNY: a card-based hardware wallet, a standalone mobile app without any log-in, or the in-app digital yuan wallet from ICBC, which requires a mobile app log-in first. 

The new ICBC wallet appears to be the first c-CNY platform that does not require an invitation. The Block was able to access the new service and try it out.  

The in-app digital yuan wallet has four main functions: deposit balances from bank accounts, withdraw balances to bank accounts, pay or receive via a QR code and initiate peer-to-peer transactions. Below is a preview of the home interface of a digital yuan wallet from within the ICBC mobile app (personal identifying information has been redacted).

Overall, the ICBC’s in-app digital yuan wallet doesn’t look significantly different from a standalone e-CNY mobile app in terms of the user interface. But whereas the e-CNY standalone app features “subwallets” — which enable direct payment options for online shops like JD.com — the ICBC digital yuan wallet only supports offline payment at this stage.

Balance top-up

At a high level, Chinese users are already familiar with the deposit or “top-up” feature in the new e-CNY wallet because it works similarly to how AliPay and WeChat Pay operate.

After tapping the “Wallet top-up” button, a new user must link their in-app ICBC digital yuan wallet with at least one bank account. It doesn’t have to be an ICBC account but it must be at one of the six state-owned commercial banks that have participated in the e-CNY test: ICBC, China Construction Bank, Bank of China, Agricultural Bank of China, Bank of Communications, and the Postal Savings Bank of China.

After that, the user is directed to a subpage where they must type in how much money they wish to deposit. The transaction will then be credited to the “Balance” section. To withdraw the balance back to any linked bank account, the user can tap the “Withdraw” button to do the reverse transaction.

Notably, there’s no transaction fee either way, which is different from the experience on AliPay or WeChat Pay at the moment. While users pay no transaction fees to top up their AliPay and WeChat Pay wallets, there is a 0.1% charge with a minimum of 100 yuan ($15) per transaction if they want to withdraw balances from their AliPay or WeChat Pay wallets back to their bank accounts.

QR Codes

The usage of QR codes is also similar to AliPay or WeChat Pay. There are two ways for users to pay in e-CNY with QR codes: either tap the “Scanner” button to use the camera to scan a merchant’s receive QR code or let the merchant scan a user’s pay code. 

This process is free, which is also the case when paying via AliPay or WeChat Pay. So it’s understandable that some are unimpressed with the new digital currency so far. But it makes a notable difference for merchants. 

In the current mobile payment scene in China, most medium-to-large physical merchants — from local convenience stores to larger institutions like hospitals — use pre-installed scanning devices to scan a consumer’s payment QR code inside AliPay or WeChat Pay.

As The Block has explained, AliPay and WeChat Pay charge merchants a fee of between 0.6% and 1% per transaction when they scan a consumer’s pay QR code. This comprises a significant revenue source for the payment providers.

Peer-to-peer transactions

Unsurprisingly, the person-to-person transaction feature is also similar to the current experience on AliPay and WeChat Pay. 

Take AliPay, for instance. A user can locate another transaction party inside AliPay by searching for the mobile phone or email address that is associated with their AliPay account. 

The e-CNY’s standalone mobile app and the in-app wallet have both applied the same technology. By tapping the “Transact” icon, users can navigate to a subpage where they need to type in a receiving party’s digital yuan wallet ID and an intended amount. 

Obviously, this is more useful when User A and B are not close to each other physically. But to complete the transaction, User B must inform User A of the unique ID of his or her receiving wallet or the associated mobile number.

Alternatively, User A can also ask the counter-party to pull up their receive QR code and then scan that code to initiate a transaction. This method is more useful when dealing with strangers in a face-to-face scenario. 

In this case, User B needs to tap the “Pay/Receive QR code” icon, which by default leads to User B’s pay code. The button below the pay code will bring up the receive code. The QR codes will also be self-updated every minute to mitigate security risks.

Five tiers

Apart from the main modules shown above, the e-CNY in-app wallet also has a “Setting” page, which shows how many bank accounts have been linked to the wallet, the wallet's "tier," and the associated daily upper limit. According to a FAQ page that came with the wallet, there are a total of five tiers of e-CNY wallets.

Tiers 2 to 5 refer to wallets that are activated remotely via the internet. To activate a Tier 5 wallet, one only needs an email or an overseas mobile number. Opening a Tier 4 wallet requires a Chinese mobile number. If a user can provide both a Chinese national ID and a Chinese mobile number, they can activate a Tier 3 wallet. 

Wallets in Tiers 3 to 5 are also not linked to any bank account, so they are not allowed to top up balances and can only send transactions or pay for goods. To upgrade a Tier 3 wallet to Tier 2, users need to connect the app with at least one bank account.

Upgrading from Tier 2 to Tier 1will require visiting a bank counter. But this service is not available at the moment, according to the FAQ page.

Each wallet tier also has a different upper limit in terms of daily and single transaction volume, as shown below.