The concept of a central bank digital currency (CBDC) has gained a lot of attention in recent years. Proponents argue that a CBDC could boost financial inclusion by providing a universally accessible payment method. However, a recent discussion paper by the Bank of Canada highlights the challenges that central banks would face in creating an inclusive CBDC.
The paper emphasizes the need to identify and address material barriers to inclusion, as well as the realities of inequity underlying aggregate statistics. The authors identify three types of inclusion that are necessary for a universally accessible payment method: financial inclusion, digital inclusion, and practical accessibility.
Financial inclusion refers to ensuring that all individuals have access to financial services. However, the paper highlights that private financial institutions may not have an incentive to address the needs of underserved populations. Therefore, the responsibility falls on central banks to create an inclusive CBDC that caters to all individuals.
Digital inclusion is another important aspect of accessibility. The authors note that while many individuals may have digital access, they may lack the necessary skills to use digital technology effectively. This is particularly true for certain segments of the population, such as First Nations youth, who may have digital access but may be less skilled in using digital technology compared to their non-Indigenous peers.
Practical accessibility refers to the ease of use and convenience of a payment method. The paper highlights that cognitive load and usability issues can be potential barriers, especially as the population ages. Older individuals may have difficulty using smartphones or may lack proficient internet skills. Additionally, disabled individuals may face greater challenges in using digital technology compared to others.
The authors emphasize that addressing these challenges is crucial for creating an inclusive CBDC. They call for deeper research into design for cognitive accessibility and suggest that central banks will need to expand their scope of interest to overcome these challenges. It is not just about the nature of the CBDC itself, but also about the delivery of services.
It is worth noting that the study focused on the specific needs of the Canadian population. A previous study found that the majority of Canadians have little reason to adopt a CBDC due to the high level of accessibility of financial services in the country. However, the challenges identified in the discussion paper are likely to be relevant for other countries as well.
In conclusion, the Bank of Canada’s discussion paper highlights the challenges that central banks would face in creating an inclusive CBDC. It emphasizes the need to address barriers to financial inclusion, digital inclusion, and practical accessibility. By understanding and overcoming these challenges, central banks can ensure that a CBDC truly promotes financial inclusion for all.