China's Central Bank Unveils Physical CBDC Card with Dynamic QR Codes

China's central bank, the People's Bank of China (PBOC), has made another step toward rolling out its digital yuan (e-CNY) with the introduction of a physical CBDC payment card. This new development allows users to make both online and offline payments using a card similar to traditional debit or credit cards, according to a report from Global Times on November 7, 2024.

The digital yuan card was first showcased at the 18th Shenzhen International Financial Expo and includes several advanced features. The card supports both tap-to-pay and scan-to-pay functions, allowing users to make payments via POS terminals or by scanning dynamic QR codes with mobile devices. The card is equipped with a screen that displays the user’s balance and payment details, and the QR code on the card dynamically changes with each transaction.

First launched in pilot applications in 2021, the digital yuan hard wallet has since evolved, integrating with China’s HarmonyOS system, allowing users to access and make payments without the need for a dedicated app.

The card is already in use for public transport payments in cities like Qingdao, located in China’s Shandong Province.

Despite the promising new technology, the digital yuan has faced challenges in achieving widespread adoption since its introduction in 2020. Some Chinese officials have expressed reluctance to store their funds in the state-controlled digital currency, citing concerns over the lack of interest payments and its limited usability compared to other payment methods.

In response to these challenges, the Chinese government is reportedly exerting pressure on local payment giants to create space for the digital yuan. Companies like Tencent, which dominates mobile payments with WeChat Pay, and Ant Group, operator of Alipay, are facing regulatory scrutiny to reduce their market share. Despite having over 185 non-bank payment institutions in the country, China’s digital payment ecosystem remains largely controlled by these two players, making the central bank’s push for the digital yuan an ongoing challenge.

While the physical CBDC card represents a significant advancement for China's digital currency efforts, its broader success will depend on overcoming concerns regarding its functionality, security, and broader acceptance among both consumers and merchants.