A study conducted by the Bank of Canada reveals that many underestimate the challenges associated with achieving financial inclusivity despite the potential for it.
One of the primary arguments for implementing a CBDC is that it could contribute to boosting financial inclusivity.
A Bank of Canada discussion paper points out that precise methods and definitions of financial inclusion in the context of CBDCs require further exploration.
The paper identifies that central banks will encounter a range of novel challenges when developing an inclusive CBDC.
The authors of the discussion paper identify three types of inclusion—financial inclusion, digital inclusion, and practical accessibility—as essential for a universally accessible payment method by “identifying material barriers and describing the realities of inequity underlying the aggregate statistics that are commonly used.”
While private financial institutions may have a vested interest in expanding their customer base, they may not prioritize addressing the needs of those excluded from the financial system.
In this light, the authors said:
“Our analysis suggests that the number of individuals who face barriers or exclusion is much larger than was previously assumed.”
The authors argue that a CBDC alone may not suffice to ensure equal access for all individuals, emphasizing the need to address these three aspects of inclusion in the design and implementation of a CBDC.
For instance, a person from a First Nations community living 25 kilometers from the nearest financial institution may face more barriers to accessing financial services compared to an average Canadian living just 1.9 kilometers away. This underscores the importance of digital inclusion in achieving financial inclusion.
Even when individuals have access to digital tools, they may lack the necessary financial literacy or comfort with technology to use them effectively. The authors also note that First Nations youth may encounter additional challenges in using digital tools compared to their non-Indigenous peers.
As the population ages and becomes more diverse, the cognitive load and usability challenges associated with digital financial technology are likely to increase, according to the authors.
A survey cited in the discussion paper indicates that older people use smartphones less frequently than younger people and the overall level of digital skills in the population is lower than expected, with only about 60% of the population assessed as having advanced or proficient internet skills.
The authors argue that there is a need for more research on how to design digital technologies with cognitive accessibility in mind.
Furthermore, people with disabilities may also encounter barriers to accessing and using the internet, with significantly lower rates of internet access among Canadians with disabilities compared to others in Canada.
The authors suggest that a CBDC may not be inherently inaccessible but rather that its accessibility may be limited by the way it is implemented and delivered.
However, to overcome these challenges, the authors propose that central banks may need to address issues that are typically considered outside their area of expertise.
Previous research has demonstrated a wide range of needs and preferences among different groups within the Canadian population concerning financial services, while another study found that Canadians already have good access to financial services, potentially affecting their willingness to adopt a CBDC.