Baidu’s recent release of a virtual “digital bank card” has triggered much speculation over its ties to the central bank digital currency (CBDC) which is currently undergoing pilot testing in cities around China.
Baidu launched the “Baidu Flash Payments Card” (百度闪付卡) at a ceremony held in Beijing on 15 August, billing it as a “next era digital banking card” that was developed by Baidu, CITIC aiBank and China UnionPay.
According to Baidu the card is a “digital bank on the Baidu app” which has no physical form, but instead consists solely of a “smart mini-app.”
The release of the card triggered much domestic speculation about its relation to China’s CBDC which is currently undergoing testing in Shenzhen, Suzhou, Chengdu and Beijing, particularly given that four of China’s big state-owned banks are already conducting tests of CBDC digital wallets.
It has since emerged however that the Baidu Flash Payments card is unrelated to current trials of CBDC, and is only for “class II bank accounts.”
China’s central bank divides individual accounts into three separate categories that differ in terms of access levels and functionality.
While Category I accounts are fully functioning normal accounts, Category II accounts restrict consumption and payments to 10,000 yuan per day, and Category III accounts are subject to a maximum balance restriction of 1,000 yuan.
Category II and Category III accounts have recently emerged as fertile ground for innovative fintech apps in China, with JD.com, Meituan Dianping and Lehua all launching related flash payments products.
Li Yongyu (李永煜), Baidu executive responsible for the Baidu Flash Payments Card, said that as a “digital banking card” it would provide a different experience compared to traditional bank cards.
According to Li it employs a “virtual debit card issuance system,” whose technical and security standards have been approved by the People’s Bank of China (PBOC) for application trials.
Li said that compared to traditional bank cards which focus more on risk and security in relation to card mediums the virtual debit card focuses more on secure transmission of digital information.
This will make it a key testing ground for similar products in future, given the increasing number of purely online direct lenders being established in China.