This week the Bank of Canada published a paper exploring the financial inclusion issues a potential CBDC needs to address. It identified significant barriers affecting rural populations, indigenous communities, low income families and those with disabilities. In contrast, an earlier paper questioned the need for a Central Bank Digital Currency (CBDC), arguing that a CBDC was unlikely to improve unmet payment needs. While the two papers sound contradictory, the latest research emphasizes that there are still inclusion needs, not across the general population but within these specific groups.
As the use of cash has declined, from 53% of transactions in 2009 to 21% in 2021, the typical metrics used to assess financial and digital inclusion – access to a bank account and access to the internet – can obscure more nuanced circumstances impacting accessibility. For example, the population of unbanked adults in Canada is around 2%. However, this proportion is significantly higher amongst low income groups.
Research has shown that under-banked Canadians (those who have a bank account but still face barriers) are more likely to rely on fringe financial services, such as payday lenders and cheque cashiers. These services charge significantly higher fees to clients already likely to have lower incomes or be financially vulnerable, putting them at a further disadvantage.
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