A recent discussion paper from the Bank of Canada raises questions about the effectiveness of a central bank digital currency (CBDC) in fulfilling unmet payment needs within an increasingly cashless society.
Over the past few years, Canada’s central bank has been researching the potential design features of a digital loonie to cater to the diverse payment requirements of its citizens. However, the latest findings indicate that most Canadians currently do not face any significant gaps in their access to various payment methods, a situation likely to persist even in a cashless environment.
The data reveals that nearly all Canadian adults—98%—have a bank account, with 87% possessing a credit card and access to the internet being widespread. Despite this, there remains a minority that could struggle with making payments in scenarios where cash is no longer accepted by merchants.
For a payment-focused CBDC to be effective in resolving these issues, it would need to achieve broad adoption among the majority of users, many of whom may not perceive a need for it. If widespread acceptance of a digital loonie fails to materialize among these users, merchants may be hesitant to embrace it as well.
The paper concludes that "the minority of consumers with unmet payment needs will only benefit from a CBDC if the majority of consumers experience material benefits that drive its use."
For further insights, you can download the full document here.