The Bank of Canada recently conducted a comprehensive study examining the potential role of a Central Bank Digital Currency (CBDC) in enhancing financial inclusion, digital inclusion, and overall accessibility.

The findings of this study are particularly significant given the rapid evolution of the digital payment landscape and the challenges faced by certain segments of the population in accessing traditional financial services.

The Canadian financial ecosystem is notably inclusive, with a staggering 98% of Canadian adults having access to banking services and debit cards.

However, there remains a subset of the population that faces barriers in accessing these services. These individuals often resort to alternative providers that might charge higher fees, such as payday loan institutions and check-cashing services.

Cash has historically played a pivotal role in financial inclusivity in Canada. However, its usage has seen a marked decline over the years. From constituting about 53% of transactions in 2009, cash usage dropped to less than 21% by 2021. Despite this decline, cash remains an accepted medium of exchange across various institutions.

The study delved into different types of inclusivity, namely financial, digital, and accessibility. One of the key insights was that many challenges affecting the accessibility of payment methods often fall outside the purview of central bank mandates. Addressing these challenges would require a concerted effort and potentially public investment in policy measures.

However, when designing a CBDC, these elements of inclusivity can be taken into consideration to ensure widespread usability. The study drew parallels between the current digital payment ecosystem and the older system where physical currency was sufficient to ensure accessibility. It was emphasized that while physical currency might have addressed barriers in the past, a CBDC would need to tackle the inherent challenges posed by the evolving technological environment of today and the future.

Interestingly, the study found that the number of individuals facing challenges that could exclude them from the traditional financial system might be higher than previously assumed. These insights are invaluable as they can guide the design of future digital payment products and services, including the CBDC.

The study also underscored the need for further research to uncover more challenges and opportunities associated with these new technologies. The ultimate goal is to ensure that the widest possible audience benefits from accessible digital payments.

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Filed under: Bitcoin - @ October 10, 2023 1:21 pm