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David Birch argues that cash reduction via fintech means an increase in net welfare. People who are trapped in a cash economy, the poor in particular, are more likely to get robbed, to get bad deals, and to get shaken down. Although that argues for reducing cash usage,  what do we do about the people people who say they would "struggle to cope" in a cashless society (one in five according to a U.K. survey) and those who say it would be "problematic" (half of those surveyed)?

"The unbanked rate has been decreasing in the United States, but it remains high compared to unbanked rates in other developed economies. Lower-income and racial and ethnic minority households are more likely to lack access to a bank account than white households with higher incomes. Fees and minimum balance requirements are important factors in the decision to be unbanked. However, several studies show that when fees are constrained, banks find low-balance accounts unprofitable, so access to bank accounts can actually decline."

"We use economic principles along with evidence from the data and the academic and policy literature to discuss frictions that might lead to inefficient financial exclusion in the United States, defined here as a suboptimal allocation of bank account services. Private market initiatives-such as financial education schemes or new online banks-or new technologies-such as prepaid cards-can help mitigate such frictions. But if the frictions persist, intervention by authorities may be justified."

The Alliance for Financial Inclusion (AFI) published a report that evaluates the extent to which retail central bank digital currency (CBDC) can advance financial inclusion in emerging market and developing economy (EMDE) countries. It concludes that, retail CBDC can be designed to alleviate identity gaps, and mobile phone and digital access divides through its unique ability to generate digital identity proxies and enable offline capabilities while being device agnostic. However, CBDC will not automatically advance financial inclusion, and if not designed appropriately, could reinforce existing barriers. Also, in many EMDE jurisdictions, they are likely to be limited by poor electricity coverage, access to (and affordability of) CBDC-enabled devices and limited cash-in and cash-out infrastructure. Finally, the report concludes that CBDC may not always be the right tool for addressing financial inclusion in different EMDE country contexts relative to other digital payment interventions. The unique feature of CBDC, which makes it distinct from other digital payments instruments, is that is issued by the central bank. But this feature does not necessarily make CBDC a better tool.

"There are more direct and impactful ways that we can address financial inclusion concerns rather than use cryptocurrencies. To address the needs of low-income households, for instance, the U.S. government could offer and encourage the use of a robust, real-time payments solution, as other countries have done.[76] (In fact, the Federal Reserve plans to launch the FedNow Service, an instant payment system, in mid-2023.) The U.S. government should also ensure that outreach efforts related to this instant payment system are focused on engaging underserved communities.[77]  "

The Asian Development Bank (ADB) published a paper that explores the potential for central bank digital currency (CBDC) to help promote financial inclusion. It considers how CBDC could leverage digital finance technologies and enhance the reach and value of formal financial products and services among the unbanked or underserved. It also looks at the challenges involved and how these could be addressed. The paper provides recommendations for policy makers and regulators on designing CBDCs, establishing preconditions, and managing risk.

The IMF published a paper that explores survey data for Uganda to compare mobile money users and non-users across a range of indicators that capture individuals' perceptions about cash, and the extent to which they remit, save, and borrow money. It finds that mobile money users, compared to non-users, are more likely to perceive cash as risky and less likely to prefer carrying large amounts of cash. It also confirms that mobile money users are more likely to receive and send remittances, save, and borrow. They also save and borrow larger amounts. This suggests that the rapid expansion of fintech in Africa is likely to reduce the demand for and usage of cash.

This Atlanta Fed article examines the evidence for claims about the connection between bank de-risking and anti-money laundering (AML) regulation. Specifically, it examines evidence for the claim that the cost of increased AML compliance and increasing bank fines have led to banks exiting entire sectors or geographical regions and that this de-risking is deeply damaging to economies. We draw on multiple sources of evidence, including financial flow data, discourse and social media analysis, an evidentiary history, elite interviews, and participant observation. In the end, it finds that substantial evidence contradicts this simple explanation of de-risking. Current efforts to review and reform the AML regime are overdue, and we need a sustainable answer to the issue of financial exclusion. That said, the evidence suggests that efforts to curb de-risking should not focus primarily on AML, nor should AML reform focus primarily on de-risking."

The Bank for International Settlements published a paper on digital platform economics. It found that digital platforms can dramatically lower costs and thereby aid financial inclusion - but these same features can give rise to digital monopolies and oligopolies. Digital platforms operate in multi-sided markets, and rely crucially on big data. This leads to specific network effects, returns to scale and scope, and policy trade-offs. To reap the benefits of platforms while mitigating risks, policy makers can: (i) apply existing financial, antitrust and privacy regulations, (ii) adapt old and adopt new regulations, combining an activity and entity-based approach, and/or (iii) provide new public infrastructures. The latter include digital identity, retail fast payment systems and CBDCs. These public infrastructures, as well as ex ante competition rules and data portability, are particularly promising. Yet to achieve their policy goals, the paper concludes that central banks and financial regulators need to coordinate with competition and data protection authorities.

"The primary use case for cryptocurrency in most wealthy countries is acquiring it and holding it, trading it, or using it in various other ways to make more money. In the developing world, where access to financial and banking systems is limited or nonexistent, innovative humanitarian organizations are piloting micro-blockchain ecosystems."

The World Bank published a report that provides evidence that demonstrates that internet availability increases jobs and reduces poverty in African countries. To fully realize their potential, digital technologies need to become more affordable and easier to use. Governments should prioritize policies and investments that increase internet coverage, foster productive internet use, and enhance skills, jobs, and earnings.

La Banca d'Italia published a survey-based paper that analyzed the relationship between digitalization, financial knowledge and financial decisions. It found that digital skills are a useful complement to financial skills in monitoring expenses and therefore to saving money. Moreover, such skills are also related to a more favorable attitude towards digital finance. With the same level of financial knowledge, digital skills do not however affect investment decisions. Finally, there is a significant gender gap, at the expenses of women, in terms of both digital skills and financial knowledge.

A paper by Adam Levitin argues that financial inclusion presents a policy trilemma. between the three goals of widespread availability of services to low-income consumers; fair terms of service; and profitability of service. It is possible to provide fair and profitable services, but only to a small, cherry-picked population of low-income consumers. Conversely, it is possible to provide profitable service to a large population, but only on exploitative terms. Or it is possible to provide fair services to a large population, but not at a profit. The paper argues for giving more serious consideration to a menu of stronger regulatory interventions: hard service mandates that impose cross-subsidization among consumers; taxpayer subsidies; and public provision of financial services, including the adoption of a mandate for the provision of free or low-cost basic banking services to all qualified applicants.