China's CBDC wallet turns to centuries-old customs to increase adoption

The digital yuan wallet app has been updated to include a traditional Chinese method of gifting money that has gone digital with the growth of digital payments.

In an effort to draw in more users, China's wallet app for its digital yuan central bank digital currency (CBDC) added a feature that allows users to send money in an electronic equivalent of traditional "red packets."

According to a Dec. 26 article in the South China Morning Post, the new feature was released over the weekend, about one month before the Chinese New Year on Jan. 22.

The "red packets," also known as hongbao in China, are customarily used for giving money as a sign of good fortune during Chinese New Year celebrations and other occasions. Popular local services like WeChat Pay and Alipay now offer virtual red envelopes as a result of the growing use of digital payments.

The e-CNY app reportedly allows a red packet to be sent to just one recipient, or a "lucky draw" can be set up for a group of recipients who will each receive a random sum from a pool of money. WeChat Pay and Alipay reportedly have features that are similar.

Users have the option of selecting a packet cover that features happy new year, birthday, and "prosperous China" wishes.

On October 10, digital yuan transactions reached a milestone of $14 billion (100 billion yuan), an increase of only 14% from the $12 billion (87.6 billion yuan) reported by the People's Bank of China at the end of 2021.

The e-CNY trails will be extended to the cities of Jinan, Nanning, Fangchenggang, and Kunming, according to a Dec. 18 report in the Chinese Workers' Daily newspaper. Four additional provinces, including Guangdong, the most populous, were added to the trials in September.

The most recent reported user base of the e-CNY wallets was in January 2022, with 261 million users having set up a digital wallet, despite the government's rapid expansion of the trials.

WeChat Pay and Alipay may be used by China's government to increase the use of its digital yuan.

Financial reports claim that WeChat had 1.3 monthly active users in the third quarter of 2018, while Alipay had more than 1 billion annual active users in its fiscal year that ended on August 17, 2020. Both services accept e-CNY.