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3 Convenience affordability and security of CBDC

can drive inclusive consumer adoption: Across all use cases, a key aspect of CBDC’s value proposition is its tested ability to drive interoperability10 and channel ubiquity for users by providing convenient payments across any provider – via any device, to any provider – as a universal instrument. This status as a general-purpose or universal instrument is a key distinction from other digital instruments like electronic (e)-money or electronic money transfers (EFTs) which can assume appropriate claims on central bank money guaranteed but not guaranteed in the same way as cash, thus limiting its ability to interact with all types of value. Furthermore, through a more decentralized design, CBDC can also help to increase payment speed and reduce settlement costs for providers via numerous thirdparty intermediaries, and potentially transfer those reduced costs to consumers. With the backing of the central bank and strengthening through security protocols, CBDC can also offer users one of the most secure and trustworthy payment instruments on the market.

4 CBDC potential for financial inclusion exists but its design must be careful to avoid risks and

worsening exclusion. Research findings highlight that CBDC could offer substantial benefits for financial inclusion in developing and emerging countries within three key use cases. However, care should be taken by developing and emerging countries to not consider CBDC a panacea for financial inclusion. CBDC will not automatically advance financial inclusion, and if not designed appropriately, could reinforce existing barriers.

Specifically, the perceived complexity could exacerbate pre-existing low levels of digital literacy and disincentivize adoption. CBDC could stimulate even more segments of the population to opt out of formal financial systems due to a lack of trust in national governments. This in turn could inadvertently increase the costs of payments through predatory pricing by unsupportive payment service providers (PSPs). These risks, as well as those that are more context-specific, are crucial to assess whether CBDC is best suited to address financial inclusion within a given country.

5 CBDC may not be an appropriate or relevant financial inclusion tool for every developing

country. The specific financial needs, and barriers impeding those needs being met, will differ from country to country. Therefore, the right tool to address those barriers is likely to be different as well. CBDC may be a good match to address the concerns of one developing country, such as those with high digital readiness or a heightened need to more rapid climate related disaster recovery assistance, but it may not be for others where existing inclusive instant real-time payment instruments or systems may be better suited. The choice to pursue a CBDC should thus not be seen in a vacuum, but rather as part of a set of interventions considered by central banks.

6 Retail CBDC implementation needs to be context-

specific and fit-for-purpose. The decision to pursue a CBDC as a relevant tool to support financial inclusion needs to be accompanied by a careful approach to its design that avoid copy-and-paste designs that may not account for local market context and barriers. To make CBDC work for a country’s citizens and businesses, CBDC should therefore be designed from the bottom up, considering the specific context and needs of the market, particularly vulnerable communities as much as possible. This approach will be crucial to avoiding the traps that current DFS channels have experienced to serve customers and ensure financial inclusion policy goals are met.

Findings from this report suggest that CBDC may not always be the right tool for addressing financial inclusion in different developing country contexts relative to other digital payment interventions. The unique feature of CBDC, which makes it distinct from other digital payments instruments, is that is issued by the central bank. But this feature does not necessarily make CBDC a better tool.

For example, interoperability and affordability are key design features for CBDC – but are also key design features for all digital payment instruments. The introduction of CBDC will not in itself solve this. CBDC could also offer another layer of complexity to models that need to be simple and efficient to contribute to financial inclusion, while also further straining institutional capacity. This does not mean that central banks should shy away from it: instead, they need to be clear on the unique value of a CBDC to financial inclusion in the existing digital payments landscape. Central banks can then design a CBDC around that.