The Bank of Canada is pursuing Central Bank Digital Currency (CBDC) in its quest to create a globally usable payment system, which is a task fraught with many challenges. The Bank of Canada has published a discussion paper that explores the complex issues surrounding financial inclusion and the enormous difficulties involved in designing an inclusive CBDC.
The paper identifies three essential dimensions of inclusion necessary for a universally accessible payment method: financial inclusion, digital inclusion, and practical accessibility. The authors of the paper underscore the substantial barriers that persist, highlighting that “the number of individuals who face barriers or exclusion is much larger than was previously assumed.”
Digital divide: Bridging the gap in digital literacy and access
A considerable segment of the population may be left in the shadows of financial exclusion because private financial institutions may not have enough incentives to meet the requirements of the underserved, which is a situation that comes from an obvious truth.
Our analysis suggests that the number of individuals who face barriers or exclusion is much larger than was previously assumed
One key aspect of this challenge lies in the geographical disparity. For instance, members of the First Nations in Canada face a considerable distance gap from financial institutions compared to other Canadians, with an average of 25 kilometers versus 1.9 kilometers. Hence, their financial inclusion would rely heavily on digital inclusion.
However, digital access does not equate to digital proficiency. First Nations youth, for instance, might have digital access but could lag in digital technology skills compared to their non-Indigenous peers. Furthermore, unfounded fears about digital security deter some Canadians from embracing digital technology, highlighting the importance of addressing digital literacy and security concerns.
Age also plays a pivotal role, with older segments of the population demonstrating less enthusiasm for digital financial technology. As the population ages, issues related to cognitive load and usability are anticipated to become more pronounced. A significant portion of the population does not possess advanced internet skills, according to a survey, necessitating a deeper exploration of design for cognitive accessibility.
Moreover, disabled individuals in Canada confront additional challenges, including limited internet access. This creates an imperative for ensuring that the CBDC is designed to be truly accessible to all, irrespective of their physical or digital limitations.
Interestingly, the authors of the discussion paper emphasize that the challenges lie in the delivery of services rather than the nature of CBDC itself. To overcome these multifaceted challenges, central banks must tackle issues that extend beyond their traditional purview, underlining the ambition required to make CBDC truly inclusive.
In a proactive step towards involving the public, the Bank of Canada launched the #HaveYourSay initiative in May 2023. The initiative seeks feedback from Canadians on the prospect of a digital Canadian dollar CBDC and its features. The consultation period, open until June 19, encourages the public to contribute their opinions and insights.
This ambitious journey by the Bank of Canada encapsulates the intricacies of modernizing financial systems while ensuring inclusivity, recognizing that the road to CBDC must be paved with solutions that address the diverse needs of the population. It’s a journey that not only transforms the financial landscape but also holds the potential to reshape societal dynamics.