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The Dallas Fed published a working paper that analyzes the impact of introducing a central bank digital currency (CBDC) on financial inclusion, and its potential adverse effect on bank funding. We highlight the role of two design parameters: the fixed cost of CBDC usage and the interest rate it pays, and derive principles for maximum inclusion and for mitigating the inclusion-intermediation trade-off. Agents' choice of money instrument is endogenously driven by income heterogeneity. Pre-CBDC, wealthier agents adopt deposits, while poorer agents adopt cash and remain unbanked. CBDCs with low fixed costs (and low interest rates) are adopted by cash holders and directly increase inclusion. CBDCs with high fixed costs (and high interest rates) are adopted by deposit holders and increase inclusion by raising deposit rates. The former allows for more favorable inclusion-intermediation trade-offs.

The IMF published a paper on a step-by-step framework to help assess central bank digital currency's (CBDC's) value proposition for improving financial inclusion. The impact of CBDC for improving financial inclusion is currently speculative, where further evidence and experience are needed to fully understand benefits and limitations. That said, it provides an opportunity that could be actively explored alongside other solutions for improving financial inclusion. Moreover, CBDC could be considered as one component of a broader set of measures to improve financial inclusion.

The IMF published a paper that investigates the relationship between fintech and financial inclusion in a panel of 84 countries over the period 2012-2020. It finds that the impact of fintech on financial inclusion is statistically insignificant (and negative) in advanced economies, but it becomes positive in developing countries with a statistically highly significant overall effect. Taken as a whole, these results-robust to alternative estimation methods-indicate that fintech endeavors may have so far failed to promote financial inclusion across all countries, but helped expand financial inclusion to a certain extent in developing countries. The paper concludes that policymakers need to develop an adequate regulatory framework that balances fostering innovation and ensuring equitable treatment of individuals and groups. This requires better financial education, strong regulatory institutions, and well-calibrated prudential regulations for a level playing field and effective supervision.

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.

The GSMA Inclusive Tech Lab launched the Interoperability Test Platform, a joint test environment combining the GSMA Mobile Money API, a harmonised industry specification for all common mobile money use cases, and Mojaloop, an open source code, developed to accelerate financial inclusion through digital payments. The platform will provide the industry with an open-source and secure environment for ecosystem participants to test their systems across different use cases in an interoperable mobile money ecosystem.

The Bank of Canada published a paper that explores quantitative and qualitative information about Canadians who face barriers to making digital payments, and implications for a potential central bank digital currency (CBDC). It identified three types of inclusion necessary for a universally accessible payment method: financial inclusion, digital inclusion and practical accessibility. The challenge is in the delivery of services rather than product design, and private financial institutions may not be incentivized to address the needs of those who are underserved. However, overcoming those challenges will require central banks to face problems that would otherwise be considered far from their scope of interest. https://www.bankofcanada.ca/2023/10/staff-discussion-paper-2023-22/

A new World Economic Forum white paper investigates the benefits and limitations of stablecoins for supporting financial inclusion in historically excluded or underserved populations. It concludes that, overall, stablecoins do not present features or capabilities that significantly reduce barriers to financial inclusion compared to pre-existing options, once accounting for consistent legal and compliance requirements. Stablecoins are subject to many of the same adoption and inclusion hurdles as other forms of retail finance, such as reliable internet and electricity, digital and financial literacy, and government identity documentation.

In Kenya, formal financial inclusion has risen to 83% from 27% in 2006, while complete exclusion has narrowed to 11% from 41%. Also, the disparities in financial access between rich and poor, men and women, and rural and urban areas also declined remarkably.

A new IMF paper discusses how fintech solutions in the Pacific islands can complement existing efforts to promote financial inclusion, enhance financial sector development, and increase inclusive growth potential, thereby reducing poverty.

This Kansas City Fed note discusses the challenges of designing CBDC to achieve financial inclusion in the United States. For example, CBDC that requires a smartphone or internet connection may only reach about half of the unbanked U.S. population. Also, the tension over technology choices could lead to neither financial inclusion nor cross-border usage being fulfilled by a CBDC. Finally, CBDC has been discussed as a possible mechanism for setting negative policy rates, but that would require abolishing cash, anathema to CBDC designed for financial inclusion.

The MIT Digital Currency Initiative (DCI) published a paper on how a central bank digital currency (CBDC) could be designed to improve access to financial services, and whether it makes economic sense for a central bank to issue CBDC as a means of promoting inclusion and what preconditions may be necessary for success. It argues that any digital currency is only as good for inclusion as the intermediaries through which people use it. Designing a CBDC that merely replicates the features of existing digital payment systems would not make a meaningful difference for financial inclusion.

IMF staff concluded that a central bank digital currency (CBDC) "could offer an untapped opportunity for promoting the development of the financial sector as well as financial inclusion in the West African Economic and Monetary Union (WAEMU)." However, the staff report warned that a CBDC presents significant challenges, and should not be viewed as a financial inclusion "silver bullet". "In particular, it would be important to assess the extent to which private sector initiatives- particularly those related to e-money-could deliver similar results in terms of inclusion, efficiency, and safety, if adequately regulated.

Fintech is being adopted across markets worldwide - but not evenly. Why not? This paper reviews the evidence. In some economies, especially in the developing world, adoption is being driven by an unmet demand for financial services. Fintech promises to deliver greater financial inclusion. In other economies, adoption can be related to the high cost of traditional finance, a supportive regulatory environment, and other macroeconomic factors. Finally, demographics play an important role, as younger cohorts are more likely to trust and adopt fintech services. Where fintech helps to make the financial system more inclusive and efficient, this could benefit economic growth. Yet the market failures traditionally present in finance remain relevant, and may manifest themselves in new guises.

The Committee on Payments and Market Infrastructures (CPMI) and World Bank published a report on payment aspects of financial inclusion. It provides tools for helping national authorities undertake diagnostic studies and to measure and track progress in enhancing access to, and use of, transaction accounts. The tools allow comparisons with international benchmarks and/or with a jurisdiction's own situation over time, and make it easier to follow reform efforts in the area of financial inclusion from a payments perspective. The CPMI and the World Bank note that these tools are dynamic and will evolve and/or need to be updated over time to accommodate new emerging market practices and other relevant innovations.

The Bank for International Settlements and World Bank published a paper on potential central bank digital currency (CBDC) impacts on financial inclusion. It concludes that a CBDC alone may not address financial inclusion challenges, but it could play a role as part of a broader suite of tools. The development of an acceptance ecosystem will be required, which will allow for the seamless exchange between digital and physical forms of currency. Significant and wide-reaching financial and digital literacy activities will also be required if a CBDC is to be afforded the same levels of trust currently enjoyed by other forms of central bank money. Also relevant are including the entry of non-banks and new business models, and applying tiered user onboarding approaches, introducing fast payment services, the use of open banking and APIs to enable efficient interfaces, and ensuring fair, transparent and risk-based access criteria for access to payment systems and financial infrastructures.

The State of Instant and Inclusive Payment Systems in Africa (SIIPS) report is an AfricaNenda's initiative together with the World Bank and the United Nations Economic Commission for Africa. The SIIPS report aims to inform payment actors in Africa and beyond about the developments in the instant retail payment system (IPS) ecosystem on the continent. This first edition highlights the current landscape of instant payment systems, including an assessment of the inclusivity of such systems, through their accessibility to all end-users, their capacity to ensure fair access and design input opportunities for all licensed payment providers. The report also dives into end users' experiences pointing to the fact that IPS are still far from meeting all consumers' payment needs.

The BIS report's key point is that the entrance of big tech into finance promises all sorts of efficiency and financial inclusion gains - which is a good thing - but those gains mustn't come at the cost of other things like privacy, financial stability and market competition.

Digital ID holds the promise of enabling economic value creation for each of these three groups by fostering increased inclusion, which provides greater access to goods and services; by increasing formalization, which helps reduce fraud, protects rights, and increases transparency; and by promoting digitization, which drives efficiencies and ease of use.

A new IMF paper discusses how fintech solutions in the Pacific islands can complement existing efforts to promote financial inclusion, enhance financial sector development, and increase inclusive growth potential, thereby reducing poverty.

"The Global Consortium for Digital Currency Governance will aim to increase access to the financial system through innovative policy solutions that are inclusive and inter-operable Opportunities for financial inclusion will be only unlocked if the space is regulated properly and includes public-private cooperation across developed and high-growth markets."