Financial inclusion (or the lack thereof) is an ever-present issue, even in the modern world. In fact, an estimated 1.7 billion do not have reliable access to a bank account or other simple banking services. This forces them to turn to alternative institutions that charge high fees, trapping them in a cycle of poverty. Many have pinned their hopes on central bank digital currencies (CBDCs) as the proverbial nail in the coffin of financial inclusion issues the world over. While it is true that CBDCs can help improve financial inclusion, it should not be taken as a be-all-end-all solution, but rather as a tool to use on the path to get there.
CBDCs can bring people closer to financial inclusion by allowing them access to a digital payment ecosystem. But it is important to remember that, in order to access and take true advantage of the benefits it offers, people also need reliable access to the internet, access to a smartphone, a trust in technology and modern innovations, sound financial literacy and a system that understands the complexities of helping others overcome historical inequities in wealth distribution. In short, CBDCs can be a powerful tool for overcoming issues of financial inclusion. At the same time, they must be used as part of a holistic approach designed to meet the needs of the unbanked and underbanked.