Exploring CBDC's Potential to Boost Financial Inclusion: A Look at Canada's Approach
Summary:
The potential of Central Bank Digital Currency (CBDC) to enhance financial inclusion is explored in a discussion paper by the Bank of Canada. Three aspects of accessibility: financial inclusion, digital inclusion and practical usability are recognized as fundamental for a universally accessible payment method. Obstacles faced by certain demographics, including the First Nations and disabled Canadians, are highlighted regarding digital access and literacy. The authors suggest that the success of inclusive CBDCs lies in addressing service delivery challenges and urge for more research on cognitively accessible design.
The potential advantages of central bank digital currency (CBDC) often include a favourable impact on financial inclusivity. Yet, what this inclusivity entails or how best to achieve it remains under examination, according to a discussion paper from the Bank of Canada. The paper finds that the development of a truly inclusive CBDC would necessitate a series of unique and relatively uncharted challenges for central banks to tackle. Crucial areas of accessibility highlighted by the paper's authors include financial inclusion, digital participation and practical usability. Authors highlight that private banks may lack the motivation to address the needs of underrepresented demographics. They claim that the proportion of individuals facing issues of exclusion or financial barriers is likely higher than previously estimated. In the authors' view, all forms of access must be adequately addressed to ensure the CBDC doesn't disadvantage those already facing difficulties. As an illustration, the First Nations members, despite living significantly farther from banks compared to other Canadians (25 km vs 1.9 km), could only benefit from financial inclusion if digital accessibility is ensured. Financial ease and knowledge also play a major role. First Nations' younger generation may have access to technology but potentially lack the knowledge for optimal usage compared to their non-native peers, according to the authors. Exaggerated concerns regarding security could deter other Canadians from embracing digital financial tools. Mental stress–the complexity involved in managing digital financial tech–and other practical difficulties could pose additional obstacles to inclusivity, especially given the ageing populace. The elderly are less frequent smartphone users and only a little over half of all citizens exhibited proficient or advanced internet skills, based upon a survey. As per the authors' suggestion, this predicament invites more exhaustive research into cognitively accessible design. The authors also remark that people with disabilities might face higher hurdles in tech utilization. In Canada, internet accessibility for disabled people is significantly lesser compared to the rest. The authors argue that the main issue resides in service delivery, not in the CBDC format itself. To address this, central banks would have to venture into areas usually deemed beyond their purview. The study has reviewed the requirements of distinct Canadian populace segments. An earlier study found that, due to the country's high access to financial services, most Canadians have little need for a CBDC.
Published At
10/4/2023 9:09:43 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.