Mastercard Raps PBoC, Others on CBDCs as Global Interest in Crypto Payment Grows

Mastercard is talking with the People’s Bank of China (PBoC) as well as other central banks across the world to enable cross-border use of their respective digital currencies, the card payments giant’s co-president for Asia-Pacific, Ling Hai, has confirmed. 

In an interview with the South China Monitor Post, Ling Hai said the plan, which is already being implemented in The Bahamas where the first central bank digital currency (CBDC) was issued, is to build on deploying Mastercard’s payment network that includes two million ATMs and 70 million merchant partners worldwide for their prepaid card to be linked to a digital wallet where a CBDC is issued.

“For us, supporting a central bank digital currency is similar to adding another fiat currency onto our network,” Ling Hai said adding that Mastercard can work with central banks to address issues related to interoperability “when the payment goes beyond a country’s borders.” 

Mastercard seeking to serve CBDCs will boost its relevance in the global payment system especially in China which is known to be a major leading economy in the CBDC-issuance space. Its digital yuan’s reach is expected to be widespread as seen so far with its test pilots. The PBoC gave Mastercard the approval in Feb 2020 to set up a bank card clearing business in China granting access to a $27 trillion payments market as part of China’s “opening up of the financial industry and deepening financial supply-side reform.” Mastercard is also one of the top three blockchain patent holders alongside Alibaba and IBM. Nonetheless, there are market insiders who think Mastercard is not likely to get its hands on China’s digital currency electronic payment (DC/EP) project.

A key reason cited as likely to preclude China from working with Mastercard on the CBDC is that China’s DC/EP was designed to pull payments off US-controlled banking networks which Mastercard is a part of – or targeted against the use of the international use of USD. Another concern is the partnership that has been struck by the PBoC’s Digital Currency Research Institute in December with Chinese payments giant UnionPay for the purpose of “jointly researching online and offline payments scenarios and other innovative applications during digital renminbi trials.”

Dubbed China’s answer to Visa and Mastercard, UnionPay’s monopoly in the Chinese financial markets ended in 2015 when rules were changed for licenses to be granted to foreign bank-card clearing providers by establishing units or acquiring a local company. 

Meanwhile, with digital currencies, as well as biometrics, contactless and QR codes trending as emerging payments technologies while the use of cash decreases, the CBDC’s evolving space presents a new competitive turf for payment providers as CBDCs threaten the need for payment intermediaries. The development arises as latest Mastercard New Payments Index shows that 71% of people say they expect to use cash less moving forward leaving businesses with a reason to expand their options at checkout. The report also found that digital currencies are gaining more ground with consumers increasingly showing interest in being able to spend crypto assets for everyday purchases. 

Global interest in cryptocurrencies as a payment method continues to accelerate, the Mastercard Index states, with 4 in 10 people (40%) across North America, Latin America and the Caribbean, the Middle East and Africa, and Asia Pacific saying they plan to use cryptocurrency in the next year.