Bloomberg reported last week that Macau regulators are in “early stage” discussions with casino operators about the feasibility of introducing a digital form of China’s currency, the renminbi, to the territory’s gaming floors. Suspicious-minded observers might take the speed with which the Macau government moved to deny this to indicate that things are, in fact, stirring in this area. There are plenty of reasons why they would be.
With Covid-19 pressing upon operators a sense of urgency to make transactions as contactless as possible, we’re seeing how, in the U.S. markets currently, the industry is moving faster than it might have otherwise to explore ways for players to be able to tap their phones to buy slot credits or chips at the tables with the same ease and security as they’d purchase their lattes at Starbucks.
Then there’s the cost savings, which promise to be considerable—no small issue for properties battling to survive in the face of economic realities which the pandemic is likely to have altered permanently, the same realities that are bearing down on gaming in the rest of the Americas, in Europe and in Macau, Singapore, the Philippines and everywhere else in Asia.
“Removing the last vestiges of cash from the floor as much as possible would be of great benefit to operators,” as Mike Rumbolz, CEO of Las Vegas-based Everi Holdings, one of the innovators in contactless, told Global Gaming Business earlier this year.
Players seem to like it too.
In the U.S., interestingly enough, it wasn’t any of the industry’s own but one of the giants of the larger fintech world, Atlanta-based Global Payments, that has deployed the first mobile wallet in a casino, a tribal property in Oklahoma, where it’s reported to have caught on in a big way.
“Early adopters have seen double-digit increases in total transaction value (dollars in play) compared to pre-COVID traditional cash access levels,” Truist Securities analyst Barry Jonas noted in a report to investors last week. “For patrons who use the cashless app more than 5x (‘super-users’), GPN has seen triple-digit increases in cash funding. The percentage of players who download the cashless app and use it again has exceeded 60 percent, with more than 50 percent of those becoming super-users.”
It would defy sense to believe that in the wreckage of Covid-19 the companies running the largest casino market in the world and those charged with regulating that market aren’t looking at the possibilities.
“Clearly, there’s a case for the evolution of the industry, from a wider perspective,” Jonas told GGB News. “I think it’s clear this is where we’re headed, not just in gaming but in our everyday lives.”
As far as Macau is concerned, Beijing has some definite views about what this will look like.
The People’s Bank of China is well on the way to becoming the first central bank to issue a digital version of its currency. Trials of an eRMB were launched back in April in several cities, Shenzhen on the Hong Kong border notably among them, and plans are to add Beijing and Hong Kong to the list. The timing for a more or less full rollout appears to be centered around the 2022 Winter Olympics in Beijing.
Of course, in China, as in the rest of the world, mobile payments are nothing new. Led by Ant’s Alipay and Tencent’s WeChat Pay, such apps handled 53 trillion yuan (US$7.8 trillion) worth of transactions in the first quarter alone, according to research cited by Bloomberg.
The difference with the PBOC’s digital version is the powers it provides the central government to track and control where the renminbi moves and how and thereby would help secure its value and its reach through measures that would enhance the government’s ability to stem capital flight, clamp down on the country’s vast shadow banking networks, combat money laundering and other financial crimes and ultimately to challenge the dominance of the dollar in the global economy.
Which is where Macau figures in. The territory swings in the ebb and flow of Beijing’s longstanding frustration with the problem of illegal currency outflows. Under Xi Jinping it has come to be deemed such a risk to national security that the government is reported to be compiling a blacklist of foreign gambling jurisdictions from which its citizens will be banned.
Yet, it’s a problem of extreme complexity, in large part because the central government has an obvious interest in a flourishing Macau economy, which, as things operate currently, is almost entirely dependent on China’s passion for gambling. There is also the problem that so much of that gambling, maybe as much as two or three times the official revenues, is conducted in ways that evade official accounting. To try to rein this in across trillion-yuan three separate currencies—renminbi, Hong Kong dollars and Macau patacas—the “three-headed hydra,” as Macau-based industry consultant Ben Lee calls them, is obviously no simple matter.
“China has to monitor all this leakage of renminbi, primarily to Hong Kong dollars,” as he explained in an interview last month with industry news site Asia Gaming Brief. “But if Macau becomes a single-currency jurisdiction with China, the need to monitor and control the leakage will be uplifted from the bottom level to the corporate level. Now the casinos are making their profits in renminbi, so they have to apply to the central authorities to convert the renminbi into foreign currency to repatriate it.”
Skeptics say this will devastate the VIP trade, which accounted for half the market’s gaming revenues prior to the pandemic and which has always relied on a lack of transparency to thrive.
“It’s too soon to know what the goal is, how it would be implemented, how the junkets would adapt,” Jonas said.
Lee believes the junkets would still have an important role to play in the market through their ability to identify and recruit big players on the mainland, where gambling marketing is prohibited by law, and to provide them with credit, a key function in a country where gambling debts are not legally enforceable.
In any event, if it comes down to it, they’ll have no choice but to give way to the larger geopolitical aims Beijing harbors for the region. As this concerns Macau, diversifying the local economy away from its dependence on gamblers from the mainland is what everyone says they want𑁋the central government, the Macau government and the casino industry included. Part of this rests with the hope that the city graduates into a true pan-Asia destination via a more expansive and diverse resort offering. In this regard, a single currency certainly would be more mass-market friendly.
The more ambitious part of this, though, the truly transformational part, is about knitting Macau, Hong Kong and their neighboring centers of industry and population on the mainland into a South China economic and financial powerhouse of global significance, encompassing international tourism, but a lot else besides. For this, currency unification would seem to be a requirement.
As Lee put it, “It’s an elegant solution to all the issues we currently have in Macau.”
