The Bank of Canada has delved into the potential of a digital loonie, investigating its design features to cater to diverse payment needs. However, a new paper by the bank raises intriguing questions about the necessity of a central bank digital currency (CBDC) to address unmet payment needs in an increasingly cashless society.
The research reveals that the vast majority of Canadians currently enjoy unfettered access to a variety of payment methods, a trend that is projected to persist in a world without physical currency. The statistics are compelling: a staggering 98% of Canadian adults possess bank accounts, while 87% own credit cards, and internet access is ubiquitous.
The paper scrutinizes the payment behavior of Canadians in both present and hypothetical cashless scenarios. It examines the potential role of a CBDC in resolving payment disparities. It emerges that while some individuals may encounter payment challenges if cash is no longer accepted by merchants, the success of a CBDC hinges on its adoption by the main consumer groups that already have access to multiple payment options. This adoption would not only fuel merchant acceptance but also encourage broader consumer use.
However, the research suggests that the majority of consumers experience minimal payment gaps, potentially diminishing their incentive to embrace and extensively use a CBDC. This dynamic could also hinder widespread merchant acceptance. Therefore, the paper underscores that the effectiveness of a CBDC in addressing unmet payment needs hinges on the majority driving its use to benefit the minority with such needs.
