e-CNY expansion may curb banking income: S&P Global Ratings

It could reduce expenses for companies and facilitate international payments.

China's digital currency, the e-CNY, is expected to expand significantly over the next two to three years, according to a new report from S&P Global Ratings titled "China's Digital Renminbi May Curb Banking Income." 

Whilst the e-CNY could lower transaction costs for Chinese corporates, it may impact fee revenue for banks.

S&P Global Ratings analyst Michael Huang noted that the e-CNY’s increasing use could reduce expenses for companies and facilitate international payments, particularly as China strengthens economic ties with partners like Saudi Arabia. 

This trend could encourage greater adoption of digital currency for wholesale and cross-border transactions.

Despite these advancements, e-CNY applications on the retail side are unlikely to replace widely used consumer payment platforms such as Alipay and WeChat Pay in the near future. 

These platforms, deeply embedded in China’s retail ecosystem, will continue to compete with banks in consumer payments.

The report also suggests that Chinese authorities are expected to focus on maintaining financial stability as they continue to develop and implement digital currency initiatives through domestic banks.