This is a compound question, but the second part of the question relies on the first.
The answer to these questions depends on the Currency Model underlying the CBDC. Based on the content of the White Paper, it appears as if the concept of “inclusion” means the participation of those who rely on Nonbank Money.
The World Bank defines Financial as:
Barriers to Financial Inclusion have existed for a long time. Fortunately, a number of efforts are poised to help broaden access to financial services taken for granted by affluent consumers.
Figure 1 shows the six services or capabilities that indicate Financial Inclusion: Bank Account, Cheaper Credit, Insurance, Savings, Financial Advice, and transfer of Funds. 1). A person does not have to have all six services or capabilities in order to have Financial Inclusion but, as a general rule, more is better. For example, in the U.S., having a Bank Account probably will also provide access to the other five services and capabilities. However, in some countries, having a Bank Account might support the Transfer of Funds, and depending on where the Bank Account is, it may or may not be insured. A Bank Account may or may not support savings and the paying of interest and may or may not include financial advice or ensure that the advice provided is fair and equitable to the saver. Within the U.S. the big hurdle is to get people into the system starting with a Bank Account.
Figure 2 summarizes the problem that people who are excluded from the financial system struggle with. If they don't have a Bank Account, then they have a problem saving, getting insurance on their savings, etc.
The financial industry has determined that getting the non-banked or the under-banked population included in the financial system is a potential growth market for their services. Some of the financial industry have developed new methods and strategies to provide their products and services to the under-served population and can actually add to their own revenue streams.
The financial industry is making this possible through the use of low-cost Financial Technology (Fintech) solutions rather than trying to extend the traditional financial products and services to the financially underserved. For example, the financial industry is now using FinTech to offer cashless Digital Transactions, the advent of low-fee Robo-Advisors, and the rise of Crowdfunding and Peer-to-Peer Lending (P2P Lending) .
According to Investopedia, Peer-to-Peer (P2P) Lending:ccc
This would require more study; however, the Savanta: ComRes & the Financial Conduct Authority did a study which is a great first step in understanding the barriers to adoption of Digital Currency and/or Digital Accounts. 4). They concluded the following:
The following discussion covers both of the Currency Models:
|B0007|| Provide households and businesses a: ||
|B0008||Provide entrepreneurs a platform on which to create new financial products and services||
|B0009||Provide faster and cheaper payments (including cross-border payments)||
|B0010||Expand consumer access to the financial system||
Access to the financial systems implies Access to the Internet. Note: This is beyond the scope of CBDC.
|B0011|| Make payments: ||
|B0012||Provide payment services to households and businesses around the clock, every day of the year||
Payment services imply Digital Accounts, which for those people already included in the financial system, it is not a problem. With the rise of FinTech solutions, many payment services already operate 24-7-365.
However, if people are currently excluded from the Financial System, they must rely on physical cash or digital cash to pay bills. Often, in some areas within the U.S., there are no financial services nearby to make physical cash payments let alone 24-7-365! Although the private sector FinTech solutions are available when people have access to:
|B0013||Provide immediate access to transferred funds||
|B0014||Reduce costs and fees associated with certain types of payments||
FinTech is expanding and improving every day. There is also competition between FinTech vendors to compete for customers, so the costs should naturally come down. However, when intermediaries are required to complete a transaction, these intermediaries extract a price to allow the transactions. This is particularly a problem in Cross-Border transactions and the closer the transactions get to Peer-to-Peer (P2P) the less the cost.
|B0015|| Reduce cross-border costs to benefit: ||
|B0018||Allow the general public to make digital payments|
|B0019|| Provide the safest digital asset available to the general public, with no: |
|B0028|| Offer the general public broad access to digital money: |
|B0029|| Support basic purchases of: |
|B0030||Support benefit payments directly to citizens|
Provide the general public broad access to digital money that is free from:
|B0033||Support a level playing field in payment innovation for private-sector firms of all sizes||
The U.S. Government already has programs available to help level the playing field. The Federal Reserve and the U.S. CBDC need to use the programs to help with Research Development Test & Evaluation (RDT&E) Funding.
Additional ways to help level the U.S. CBDC playing field:
Small Business Innovation Research (SBIR): The original charter of the SBIR program was to address four goals:5)
Small Business Technology Transfer (STTR): The Small Business Technology Transfer program, or STTR, came later and was modeled after the SBIR program. Its goal, however, is to facilitate the transfer of technology developed by a research institution through the entrepreneurship of a small business concern (SBC). Research institutions include universities and Federally Funded Research and Development Centers, also referred to as FFRDCs. It is important to keep in mind that the applicant for an STTR award is always a small business.6)
Grants.gov: Provide a common website for federal agencies to post discretionary funding opportunities and for grantees to find and apply to them. grants.gov
SBA 8(a) Business Development Program: Sections 7(j)(10) and 8(a) of the Small Business Act (15 U.S.C. §§ 636(j)(10) and 637(a)) authorizes the U.S. Small Business Administration (SBA) to establish a business development program, which is known as the 8(a) Business Development program. The 8(a) program is a robust nine-year program created to help firms owned and controlled by socially and economically disadvantaged individuals.
Businesses that participate in the program receive training and technical assistance designed to strengthen their ability to compete effectively in the American economy. Also eligible to participate in the 8(a) program are small businesses owned by Alaska Native corporations, Community Development Corporations, Indian tribes, and Native Hawaiian organizations. Small business development is accomplished by providing various forms of management, technical, financial, and procurement assistance.
SBA partners with federal agencies to promote maximum utilization of 8(a) program participants to ensure equitable access to contracting opportunities in the federal marketplace. Once certified, 8(a) program participants are eligible to receive federal contracting preferences and receive training and technical assistance designed to strengthen their ability to compete effectively in the American economy. https://www.sba.gov/federal-contracting/contracting-assistance-programs/8a-business-development-program SBA-backed loan guarantees: The U.S. Small Business Administration helps small businesses get funding by setting guidelines for loans and reducing lender risk. These SBA-backed loans make it easier for small businesses to get the funding they need. https://www.sba.gov/funding-programs/loans
|B0034||Generate new capabilities to meet the speed and efficiency requirements of the digital economy||
|B0035|| Streamline cross-border payments by using: ||
|B0038|| Allow private-sector innovators to focus on: ||
|B0041||Support streamlining cross-border payments||
Mobile Payment Systems already in many countries around the world. The barrier does not seem to the technology or the desire on the part of the FinTech industry but the Geopolitical.
Apple Pay participating banks in Africa, Europe, and the Middle East. Apple Pay works with many of the major credit and debit cards from the top banks. Just add your supported cards and continue to get all the rewards, benefits, and security of your cards.https://support.apple.com/en-us/HT206637
Google Pay users in the U.S. will be able to send money to Google Pay users in India and Singapore, thanks to a new integration with Western Union and Wise. By the end of the year, we expect that U.S. Google Pay users will be able to send money to people in more than 200 countries and territories through Western Union and to more than 80 countries through Wise. https://blog.google/products/google-pay/send-money-loved-ones-abroad/
|B0043||Promoting financial inclusion—particularly for economically vulnerable households and communities||
The financial industry is already happening through the use of low-cost Financial Technology (Fintech) solutions rather than trying to extend the traditional financial products and services to the financially under-served. For example, the financial industry is now using FinTech to offer cashless Digital Transactions, the advent of low-fee Robo-Advisors, and the rise of Crowdfunding and Peer-to-Peer Lending (P2P Lending) .
|B0045||Enable rapid and cost-effective payment of taxes||
Sales taxes are already collected by the merchant at the point of sale.
The Internal Revenue Service (IRS) uses third-party payment processors for payments by debit and credit card. It's safe and secure; your information is used solely to process your payment. 7)
Each state and local jurisdiction has different rules.
|B0046|| Enable rapid and cost-effective delivery of:||
The U.S. States like California would claim that this already exists with Electronic Benefits Transfer (EBT). This could be expanded to a national level but would require Laws and Regulations to change.
According to the IRS8):
|B0047||Lower transaction costs||
FinTech solutions as well as Mobile Payment Systems such as Apple Pay or Google Pay have already brought the cost of a transaction down.
|B0048||Provide a secure way for people to save||
FinTech solutions as well as Mobile Payment Systems such as Apple Pay or Google Pay already supports customers maintaining a positive balance.
|B0049||Promote access to credit||
FinTech solutions as well as Mobile Payment Systems such as Apple Pay or Google Pay have already brought credit to customers.
|B0054||Attract risk-averse users to CBDC||
The only way to offer the safest digital asset is to develop Digital Cash.
|P0003||Complement current forms of money and methods for providing financial services|
|P0023||CBDC would need to be readily transferable between customers of different intermediaries||
This is a place for International Standards to be created.
There are lots of “common standards” that can apply to Blockchains. See within each of these sections for a list of applicable standards:
Unfortunately, within the “blockchain” world, there is confusion about what constitutes a standard. Often, if something is Open Source, it is considered a standard. However, often these projects lack the rigor needed to be considered a “standard”. Also, see the discussion in the DIDO RA on Talk Openly Develop Openly (TODO) and look at the DIDO RA definition of a Standards Developing Organization (SDO).
|P0025||CBDC intermediary would need to verify the identity of a person accessing CBDC||
Many systems are now using Two-Factor Authentication (2FA) requiring Biometrics (i.e., facial recognition, fingerprints, etc) or One-Time PIN (OTP). These 2FA methods generally require the user to be physically present to successfully log in or to have access to a mobile device like a phone or tablet.
Also see OMG DIDO-RA section on Authenticity.
|P0026||CBDC transactions would need to be final and completed in real-time||
CBDC Transactions need to compete with the current Currency Model used by the financially excluded, which is primarily cash partly because it is “real-time”. You see something, you want to buy it, you have the cash, and you complete the transaction then and there.
|P0027||CBDC a risk-free asset||
Obviously, cash is the ultimate risk-free asset readily available to the public at large. However, cash does have its risks too. For example: although cash is tangible and can be held in your hand, cash can be stolen or kickbacks required without a trace, which increases risks for people who use cash.
This research identifies three key factors that drive cash reliance in general. In factors in order of the importance is 9):
This is largely supported by the FCA’s Financial Lives survey, which outlines that:
The Better than Cash Alliance held an event and as part of the program, they held a moderated an Oxford-style mock debate entitled “Is Cash the Enemy of Financial Inclusion?” which was a thought-provoking approach to discussing the pros and cons of cash in financial inclusion. Table 2 is a summary of that debate.10)
|R0011|| Increased Risk to consumer's vulnerability to: ||
|D0012||Design should address privacy concerns by leveraging existing tools already in use by intermediaries||
See section 4.4 National Privacy Considerations/
|D0015||Design should include any dedicated infrastructure required to provide a resilience to threats such as operational disruptions and cybersecurity risks|
|D0016||Design should include offline capabilities to help with operational resilience of the payment system|
|D0017||Design should include digital payments in areas suffering from large disruption, such as natural disasters|