March 27, 2024
Challenges in Central Bank’s Pursuit of CBDC Inclusivity
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Challenges in Central Bank’s Pursuit of CBDC Inclusivity

The notion that a central bank digital currency (CBDC) could enhance financial inclusion is widely acknowledged. However, the intricacies of achieving this objective and defining the term “financial inclusion” are subjects that require further exploration, as outlined in a discussion paper from the Bank of Canada. The paper underscores that central banks will encounter various novel and unconventional challenges when striving to establish an inclusive CBDC.

By “identifying material barriers and describing the realities of inequity underlying the aggregate statistics that are commonly used,” the paper’s authors have identified three crucial facets of inclusivity essential for a universally accessible payment method: financial inclusion, digital inclusion, and practical accessibility. Private financial institutions may lack the motivation to cater to the needs of underserved individuals. The authors raise a poignant point in this regard:

“Our analysis suggests that the number of individuals who face barriers or exclusion is much larger than was previously assumed.”

The authors also emphasize that without accounting for all three aspects of accessibility, individuals facing challenges in one form of inclusion may continue to experience the same disadvantages when a CBDC is introduced. For instance, members of the First Nations community typically reside much farther from financial institutions than the average Canadian (25 kilometers vs. 1.9 km), and their financial inclusion would be contingent on digital inclusion. Additionally, factors like financial literacy and ease of use play pivotal roles. First Nations youth, for instance, may have digital access but exhibit lower proficiency in using digital technology compared to their non-Indigenous counterparts. Concerns about digital security may also deter other Canadians from embracing digital technology.

Cognitive load, which refers to the difficulty in using digital financial technology, and other usability concerns represent potential barriers to accessibility, particularly as the population ages. Older individuals tend to use smartphones less frequently than younger generations, and a survey cited in the paper indicates that fewer than 60% of the population possesses internet skills considered proficient or advanced. The authors contend that the problem requires “deeper research into design for cognitive accessibility”.

Disabled individuals may encounter additional challenges in utilizing digital technology, with considerably lower internet access than the rest of the Canadian population.

It is important to note that the study underscores that the challenge lies in delivering services, rather than inherent issues with the CBDC itself. Overcoming these challenges will compel central banks to tackle issues that might be considered well beyond their typical scope of interest.

The study takes into account the unique needs of specific segments of the Canadian population. A previous study determined that a significant proportion of Canadians might have little incentive to adopt a CBDC due to the high accessibility of financial services in the country.


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