Central bank digital currency (CBDC) designers should be alert to a potential mismatch between policy vision and actual users’ needs, the authors of working paper published by Austria’s central bank have cautioned.
Oesterreichische Nationalbank (OeNB)’s publication arrives as the European Central Bank (ECB) approaches the half-way mark of its ‘investigation phase’ into a potential eurozone CBDC. The OeNB is a member of the Eurosystem (the ECB and the central banks of the 19 European Union member states that use the euro).
OeNB’s paper, ‘What can CBDC designers learn from asking potential users? Results from a survey of Austrian residents’, is based on a survey of 2,006 Austrian residents (aged 16 and above). They were asked about their payment preferences, attitudes towards a digital euro, selected technical features as well as potential security and privacy concerns.
‘Our high-level lesson for CBDC designers is that they must not underestimate how exotic the concept of CBDC is for large parts of its potential users,’ the paper’s authors state. ‘This stands in contrast to the impression conveyed in policy reports, and calls for a more user-centric and empirically founded approach to CBDC design’.
‘Our own reading of this result is to take it as a sign of caution: if the mismatch between policy vision and real users’ needs prevails, CBDC could be at risk of becoming a government information technology project that fails to live up to its ambition,’ they conclude.
‘Very high’ satisfaction with existing payment options
The growing number of initiatives to offer central bank money to consumers in the form of retail central bank digital currency (CBDC) have triggered discussions on its optimal design but the perspective of potential users has not so far been widely considered, the paper’s authors explain.
Those polled were asked about their demand for a digital euro in several use cases. They could also state preferences on key features of a retail CBDC, such as the access model (account versus digital token), offline functionality and person-to-person payments. They further reported the perceived importance of attributes, such as payments security and privacy.
Two-thirds of respondents had never heard of a digital euro but 54 per cent ‘showed at least some interest when asked’. Satisfaction with existing payment options was ‘very high’ irrespective of the transaction type.
Using tailored questions to elicit the preference between an account model for CBDC (inspired by online banking and card payments) and an access model using digital tokens (inspired by cryptocurrencies), the researchers found ‘overwhelming’ support for account-based access. ‘Even a majority of cryptocurrency owners prefers identified accounts over more anonymous tokens’, they add.
Offline functionality was regarded as important. The possibility to transfer digital euros directly between people was regarded as less important than offline functionality. Respondents valued payment security ‘considerably higher’ than transaction data privacy.
‘Central banks are advised to embrace a more user-centric design of CBDC, which must include communicating the key concepts and benefits to the potential users,’ the authors write.
Users of non-cash payment instruments, tech-savvy persons and owners of cryptocurrencies are likely to be among the first adopters of CBDC, the paper states, adding that cryptocurrency owners ‘deserve special attention as they have already collected experience with elements of new forms of (arguably) digital money, such as wallets or the handling of cryptographic keys’.
‘Intensive interaction’ with prospective users needed
Austria, which has a population of about nine million, is described by the paper’s authors as a ‘small country with comparatively high cash use’ (the largest EU member state is Germany with about 83 million people).
‘To minimise the risk of retail CBDC becoming an unsuccessful government information technology project, designers are advised to explain the available options and their trade-offs to the group of likely early adopters extensively and clearly,’ the papers authors write. ‘Perhaps the most general lesson that emerges from this study is that CBDC designers cannot hope to get very precise guidance on their key design decisions by just asking users about a payment instrument that does not yet exist and that necessarily must appear a bit elusive and mysterious to prospective users. The development and design of a retail CBDC will need an intensive interaction and dialogue with prospective users. This involves monitoring the effectiveness of communication activities as well as collecting information about prevailing concerns with repeated empirical studies using methods that are robust to selection bias.’
The 44-page working paper has five authors: Helmut Elsinger, Helmut Stix and Martin Summer from the central bank’s research section; and Svetlana Abramova and Rainer Böhme from the University of Innsbruck’s Department of Computer Science. The data informing the paper was collected as part of a survey commissioned by the Vienna-based OeNB (‘OeNB Barometer 2021/1’) undertaken between 18 June and 20 July last year.
The authors describe their overall results as ‘tentative’ for reasons including that, in their words, ‘our survey demanded a lot of imagination from its participants as we were asking questions on a hypothetical technology many of them knew nothing about’; and that ‘not all results from Austrian consumers might generalise to more cashless societies or the euro area as a whole’.
They also add that ‘some of the assumed social benefits of CBDC, such as stability and privacy, seem incredibly hard to evaluate with direct questions to potential users’.
The Global Government Fintech Lab (held in Estonia in 1 June 2022) featured a panel session titled ‘How can CBDCs help deliver public good?’. Watch the session in full (46min 36sec) =>
Source: Global Government Forum YouTube page
=>>> Global Government Fintech’s dedicated ‘Digital Currencies’ section <<<=
‘ECB consults experts over ‘privacy-enhancing’ digital euro tech’ – our news story (20 July 2022) on the ECB inviting external experts to participate in a short series of deliberations on data privacy-related challenges involved in designing a digital euro
‘Digital euro prep enters prototype territory’ – our news story (3 May 2022) on the ECB starting to explore ‘interface solutions’ for making payments with a potential digital euro
‘ECB kicks off €20m tender for digital euro architects’ – our news story (2 March 2022) on an ECB tender process for design and business model consultancy
‘D€: unanswered questions (and quirks) amid Europe’s CBDC “nitty-gritty”’ – our analysis (20 September 2021) of eurozone central banks’ digital currency explorations
‘Digital euro tech investigations would take two years: ECB’s Panetta’ – our news story (15 April 2021) on a Fabio Panetta appearance before the European Parliament’s economic and monetary affairs committee (on 14 April 2021)