Vital Importance of the CBDC Use Case

The Bank of Canada (BOC) has issued a staff discussion paper examining whether or how CBDCs can deliver on the promise of financial inclusion in a cashless society. ¹

BOC has identified two scenarios where Canada might introduce a CBDC. The first is the emergence of a cashless society and the second where there is the widespread use of alternative digital currency, such as Bitcoin, or a foreign CBDC. This paper assumes the former scenario, driven not by any action of BOC but by changes in consumer behaviour. It asks whether a payment focused CBDC could successfully address unmet payment needs.

Based on BOC data and information from Canada’s payment diary, 98% of Canadians have a bank account and a debit card and 87% have a credit card. 90% of households have access to high quality internet (2021 data) and 95% of those 15 years old or older use the internet regularly (2022 data). Bank accounts give people access to the e-Transfer system, pre-authorised payments, online bill paying and cheques.

The majority of Canadians, therefore, have excellent access to the financial system and few face payment gaps or friction.

Payment segmentation

Three important groups are discussed other than the majority of users:

1. Early adopters

There are people who prefer a digital only lifestyle, avoid cash use and are eager to adopt payment innovations. In the 2022 payment diary, 9% of respondents had used a digital wallet app to make a payment in the last week and 1% had used Bitcoin to make a payment. 14% said they did not pay with cash, although half of these people still carried cash.

2. Cash dependent

This group consisted of the underbanked, those who valued privacy and those who were not able to use digital payment means. In the payment survey, 5% of respondents said they paid cash only. Perhaps the 13% who do not have a credit card are in this group.

3. Technology averse

This group include those with poor broadband internet access. Research from 2020 identified 8% of the population as ‘non-users’ of the internet and 2022 research 11% as ‘basic users’. 16% of people in these categories don’t shop online.

Table below summarises the payment options of this group in different circumstances.