Empowering Financial Inclusion
Best Practice Research for an Accessible CBDC
The convenience of digital payments with the traceable nature of cash.
Introduction
In the rapidly evolving realm of digital payments, marked by a shift away from coin and paper transactions, the spotlight on artificial intelligence often eclipses crucial discussions around Central Bank Digital Currencies (CBDCs). As commercial outlets increasingly embrace card-based and contactless payment methods, many people can find themselves excluded, including the underbanked, unbanked, those with disabilities, or those experiencing homelessness.
Against this backdrop, the release of CBDCs emerges as a potential solution, providing tools for everyday transactions and fostering financial inclusion for everyone. This thought piece explores the transformative impact of CBDCs on global financial systems, urging a nuanced understanding beyond the prevailing AI narrative. With a focus on real-world user experiences, it advocates for the development of CBDCs that are not just technologically advanced but also accessible and inclusive for diverse populations, reshaping the future of finance.
A Changing Payment Landscape
In a rapidly changing world of payments and finances, we're seeing commercial outlets opting for "non-cash", "card only", or “contactless” payment methods. Over the past decade there has been a decrease of nearly 15 billion payments made by cash transactions in the UK, while debit card use has increased by more than 10 billion payments according to UK Finance.
The graph below presents the payment volume splits of eight payment types between 2012 to 2022:
Half of all Payments Now Made Using Debit Cards (Chart 1.1 – Payment volumes (millions) 2012 to 2022)
This shift in how we’re pay for things, is leaving many exposed to being left behind or excluded from the ability to pay for basic goods and services. Some of those effected, include people who are underbanked or unbanked, with those who are experiencing homelessness and people with cognitive and sensory disabilities being particularly impacted.
“Over 3,000 people are sleeping rough on any given night.”
This is a statistic reported by the UK charity Shelter England, who have shared a breakdown report of the number of people experiencing homelessness in the UK, including young adult and children. The table below presents Shelter England’s estimated data on the number of people experiencing homelessness on any given night in England:
Additionally, according to The U.S. Department of Housing and Urban Development there are around 600,000 people experiencing homelessness in the USA alone. This concerning fact, particularly when thinking about the shift’s countries are making away from coin and paper transactions. In doing so, one would need a bank account with a payment tool (i.e., a card, smartphone, or fob for example) to complete a transaction. Without a fixed address some commercial banks will not offer someone a bank account, and without a bank account it can be a challenge to obtain a job. Without a job, it's almost impossible to obtain a fixed address, and so the cycle continues. This cycle is even more challenging for young people as age restricts them from obtaining a place to live on their own, a bank account without a guardian, or a job due to ethical practices. So, paper and coin transaction tools are currently still a necessity for many. Having said this, there are some bank schemes that support people with no fixed address. However, this is still a challenging task, and many people continue to struggle being accepted onto these support schemes. The release of CBDCs have the potential to offer people in these situations methods and tools to make basic day-to-day payments and support a way of keeping money safe if they’re unable to secure a bank account.
When considering payments, savings, or anything to do with finances, in most cases, people want security, privacy, and convenience when dealing with their money. A feature that cash (i.e., coins or paper currencies) has continued to offer billions of people globally. Today’s physical cash is designed with a scientific approach to produce increasingly complex and detailed products, with the aim to be accessible, inclusive, secure, and to prevent counterfeiting. As perceived by many, one of the greatest assets of cash is its ability to be used offline and for its user to be somewhat untraced, providing a sense of privacy and comfort in their purchases. Something digital payments (i.e., debit, credit, and gift cards) cannot offer.
Although offline digital payments could exist with the introduction of CBDCs, it is a complicated process and has its own challenges including counterfeiting and double spending. If we take the assumption that the technology used to prevent counterfeiting and double spends of a CBDC will be overcome with research and development, there could be significant benefits to those who currently rely on cash to make payments using a CBDC.
Recently, I’ve been delving into the world of digital payments from today’s current methods of offline and online cash payments to cryptocurrencies, stable-coins, and CBDCs. In this thought piece I review some of key elements I believe must be considered when developing any digital payment tool and infrastructure. The release of Central Bank Digital Currencies presents a transformative shift in the landscape of financial systems worldwide.
This thought piece aims to explore the implications of CBDCs on both the general public and businesses. From potential benefits to emerging challenges, we’ve been uncovering how CBDCs may impact the everyday lives of individuals and the operations of businesses, crucially shaping discussions around this evolving financial paradigm.
What is a Central Bank Digital Currency?
A CBDC is a government-issued, digital form of a country's national currency. It’s a payment method that is regulated by the central bank of the issuing nation, with the aim of combining the efficiency of digital transactions with the stability of traditional central bank currencies (i.e., cash).
Many central banks around the world have been exploring the potential benefits and risks of CBDCs. According to Statista, 11 countries around the world have adopted a CBDC, with 53 other countries currently at the advanced planning stages of developing one. Unlike cryptocurrencies like Bitcoin or Ethereum, which operate on decentralised and often anonymous networks, a CBDC is centrally issued and regulated by the country's central bank.
With any new innovation there comes a host of potential advantages and disadvantages. However, when it comes to our finances and a new way of spending money, much larger implications are at play. Some key attributes may include improved payment efficiency, financial inclusion, and reduced reliance on physical cash. However, there are also concerns related to privacy, security, and the impact on the traditional banking system. We’ll review this in more detail later on.
Why should we research the user experience of a CBDC with real people?
As a Research, Designer, and Strategist, I have always involved current, future, and expert users in the process of developing any brands product, service, or system. This approach allows us as strategists and designers to hear the voices that live through these experiences daily, and develop new solutions that make those experiences better, more accessible, and more inclusive.
It’s when we begin to talk about money, particularly payment and saving experiences, that this approach of speaking with users is really put to the test. We all use or interact with a form of money at some point in a day, week, or month, and so how do we then capture a nation’s, or large scale population’s, multiple cultural differences, diverse behavioural traits, various preferences on chosen payment options, and not to mention the many types of challenges and disabilities that must be considered when developing an all accessible financial tool?
“An estimated 1.3 billion people – or 16% of the global population – experience a significant disability today.”
I’ve developed numerous engagement tools, focus group and workshop approaches, but more importantly tailored segmentation model approaches for each project’s specific need. When combined, it can enable us to target niche groups of people we believe are vitally important to hear from when developing any product, but even more so for a new financial tool, such as a CBDC.
Developing a CBDC must consider everyone within a population. This includes all ages, all abilities, all ethnicities, and all genders. No individual person should feel excluded from the access or use of their nation’s currency. In some cases, and in some nations, there are those that are excluded from current payment tools because of the situation they’re in, the disability they have, or the age they are. These exclusions are not always visible either. Some are excluded by the very solution in place that is supposed to support their payment needs, but due to stigmas around some financial tool solutions, these people can feel embarrassed or discriminated against when going to use them.
My philosophy is to listen to real people and approach the topic in a holistic manner by speaking with experts within specific fields, such as cognitive, physical, and sensory disabilities, along with charities supporting people experiencing homelessness or parents of children under the required age to acquire a bank account. These groups have helped us gain a better understanding and have contributed to our evolving knowledge-bank of best practice approaches and solutions for how people want and need to engage with their finances.
We continue to learn and educate ourselves on this topic and would strongly advocate for those developing a CBDC – or any digital currency for that matter – to do the same. We know there is still much to learn and uncover to really build accessible and inclusive payment tools that everyone can use and engage with. But unless we continue to work with the people who will be using these products and services, we won’t reach a fully accessible goal. Central Bank Digital Currencies have the potential to offer everyone an unstigmatised, accessible, and inclusive payment solution, but there is still much to uncover and understand.
What are the potential benefits of a CBDC?
Below is a selection of key benefits a potential CBDC could have upon implementation. The list is not exhaustive but is intended to provide an overview of some important attributes to keep in mind.
Financial Inclusion
CBDCs have the ability to provide easier access to the financial system for individuals who may not have access to traditional banking services. This could help promote financial inclusion by allowing more people to participate in the formal economy.
Efficiency in Payments
CBDCs could enable faster and more efficient payment systems, reducing transaction costs and settlement times. This can be particularly advantageous for cross-border transactions.
Consumer Privacy and Control
CBDCs could potentially offer individuals more control over their personal financial data. However, this would depend on the design and implementation of the CBDC, as privacy considerations need to be carefully addressed.
Security and Fraud Prevention
CBDCs have the ability to offer enhanced security features, reducing the risk of counterfeiting and fraud. CBDC transactions can be more easily tracked and monitored, helping to prevent illicit activities.
Financial Innovation
The introduction of CBDCs could stimulate financial innovation by providing a platform for the development of new and more efficient financial products and services.
What are the potential pitfalls of a CBDC?
Although there may be many inclusive and accessible benefits to potential CBDCs, there are also many important usability watchouts that should also be considered. The list below provides a short summary of some of these features of potential CBDCs. The list should not be assumed true for all CBDCs and will include many more topics that are likely to be part of ongoing research and planning stages for a CBDC.
Privacy Concerns
The design of CBDCs may raise privacy concerns as they involve the digital tracking of transactions. Striking a balance between the need for transparency and individual privacy is a challenge that regulators and central banks must address. While transparency is a positive aspect, the lack of anonymity in CBDC transactions might be viewed negatively by those who value the privacy associated with physical cash transactions.
Security Risks
CBDCs introduce new challenges related to amount of funds available on a new type of device and whether these devices have built in security features like bank cards and smart phones, or whether they appear more like cash. Digital currencies could also be vulnerable to hacking, fraud, or other malicious activities, posing a risk to the financial system and an individuals' funds.
Technological Accessibility
Not everyone may have access to the necessary technology for using CBDCs, such as smartphones or reliable internet connections. This could intensify existing inequalities if digital currency adoption becomes widespread without addressing these access issues.
User Education and Adoption
Before even considering a new way of paying for things, many people may need to be educated about the use and benefits of CBDCs. Ensuring widespread adoption and understanding of the digital currency could be a significant challenge considering the complexity of the subject.
Accessible and Inclusive Standpoint
My experiences within the world of finance have enabled me to cross paths with some hugely influential and insightful figures. I’ve heard from a diverse number of individuals, groups, charities, and organisations on topics that span across typical day-to-day payment behaviours to future pain points and challenges of potential CBDC transactions. Throughout my time on these research and development projects I’ve uncovered some unique assets, features, and techniques that can provide heightened experiences for people who may currently struggle with the payment and saving tasks that many others find simple and second nature.
Below is a short summary of my accessible and inclusive takeaways for developing new financial tools.
Listen to Experts
Engage industry-leading experts in accessible and inclusive user experience solutions to uncover challenges faced by users with disabilities or those who are experiencing homelessness. Experts’ knowledge shared will enable the research being conducted to cover the width and breadth of a populations’ challenges. Follow their recommendations to create a more inclusive products or services.
Non-Stigmatised R&D Processes
Hearing the unheard voice is a key factor in the development of any product, service, or system. It’s integral and should be a fundamental approach when undergoing research for a new financial tool that needs to be accessible by a nation’s entire population. Make sure to avoid features that may stigmatise people with cognitive, physical, and sensory challenges or disabilities. Instead, include them throughout the planning, development, and implementation stages of a new product or service.
Trusted Designs
After listening and speaking with charities, disability experts and people with a broad range of disabilities, we’ve found that users are more likely to trust up-to-date user interfaces that prioritise simplicity, ease of use, and intuitive designs. It’s important to integrate existing design principles that gain widespread trust into CBDC development. Avoid implementing features or assets that are too unique or add a layer of learning.
Standardised Architectures
Accessible and inclusive architypes have continuously been developed by some of the leading tech companies, who openly share their findings and UX design principles online. Using existing architectures and design guidelines for digital interfaces when developing CBDC products or services should be intrinsic to a development process. It’s also worth noting that accessibility guidelines shared by many government bodies should be followed in accordance with national and international regulations.
Simplifying Language
When talking everything finance, it can bring confrontation, shame, or insecurities out of anyone. Throw in the complexity of digital currencies and in particular Central Bank Digital Currency, and it’s likely to cause barriers to be built up. Use familiar terminology when discussing finances and technology to avoid confusion or frustration from participants.
To Conclude
In conclusion, the research and development of Central Bank Digital Currencies represent a pivotal moment in evolution of financial systems worldwide. However, the success of CBDCs hinges on more than technological innovation alone; it necessitates a profound understanding of user experiences, particularly in the realm of payment transactions.
For nearly a decade, my approach to design and strategy has consistently involved engaging with current, future, and expert users. This methodology allows us to capture the diverse voices that navigate widespread experiences, fostering the creation of award-winning solutions that not only provide better experiences but also more accessible and inclusive outcomes. The challenge intensifies when dealing with financial interactions, an aspect universally experienced by all individuals on a daily, weekly, or monthly basis.
The necessity to research the user experience of CBDCs with real people stems from the need to comprehend and accommodate a nation's many cultural differences, behavioural traits, preferences in payment options, and the wide-ranging challenges and disabilities that individuals may face. Our extensive experience has led us to develop specialised engagement tools, focus group and workshop approaches, and tailored segmentation models to ensure that the voices of niche groups crucial in developing a CBDC are heard.
Developing a CBDC necessitates an all-encompassing perspective that considers every segment of the population. No one should feel excluded from using or accessing a nation's currency. In some instances, existing financial tools inadvertently exclude individuals due to their circumstances, disabilities, or age, extending a cycle of embarrassment or discrimination. Our philosophy revolves around engaging with real people, including experts in specific fields such as cognitive, physical, and sensory disabilities, along with charities supporting those experiencing homelessness or parents of children unable to acquire a bank account.
As we stand at the crossroads of financial innovation, it is crucial to approach the development of CBDCs with a nuanced understanding of both the opportunities and responsibilities they entail. Through thoughtful consideration for accessibility and inclusive practices, CBDCs have the potential to redefine financial landscapes, ensuring that the benefits of a digital future are accessible to all.
