Maiden Labs

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

The use of “e-money” in Indonesia began in 2007. In 2009, uang elektronik (electronic money) was given a distinct legal definition apart from the type of digital money used with credit, debit, and ATM cards (BI 2009). Defined as a means of payment, e-money is stored electronically (for instance, on a server) and functions practically as a type of digital credit that can be purchased from licensed companies and usually accessed through an app. Once purchased, this money can only leave the app in the form of payment to an affiliated merchant, unless the customer has upgraded their account. In this way, e-money operates similarly to gift cards—money that has been earmarked for a specific purpose (Zelizer 1995).

The discourse around digital payments in Indonesia has emphasized developing toward a “less-cash” society (BI 2014; SNKI 2017). In a context dominated by cash, and where few people have access to credit cards, e-money represents a novel alternative to cash-based transactions (Azali 2016; Demirgüç-Kunt et al. 2018). However, while the e-money transacted through these apps may be denominated in state-issued rupiah, it is being transported within a privately controlled infrastructure.

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

When we think about financial inclusion, we often imagine people going by themselves to financial institutions or directly using payment apps on their phones. We think of access as individual, direct, and unmediated.

For people in the village of El Progreso*, in the northern Sierra of Puebla (Mexico), access to financial services is never that simple. Despite cash predominating in this relatively remote rural area, most people also use financial services, whether for saving money, receiving remittances, or accessing credit. However, this access is rarely direct. All sorts of human intermediaries intervene in the process: friends, relatives, people with good credit, or personnel at financial institutions.

By analyzing the role played by those actors, I highlight some problems faced by people when they try to access financial services, as well as how they try to resolve these problems. I do not pretend to be exhaustive but rather demonstrate how important it is to look at those spaces of intermediation to understand better people’s monetary practices. This will allow me to challenge some common assumptions about access to financial services in rural areas.

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

In our project, we looked at family remittances between the United States and Mexico, the third-largest remittance corridor worldwide by volume, after China and India. By family remittances, we mean cross-border transfers of funds that originate from a sender to a beneficiary. The sender is a migrant worker (documented or undocumented, Mexican-born or offspring with at least one parent born in Mexico), who sends a share of their income—around 20% of their wage, or an average US$370 per month, in two or three installments—across the border. Beneficiaries are family members, typically women—mothers, close relatives, or spouses.

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

Nigeria is a lower middle-income country with a large informal sector and low rate of financial inclusion. This is despite a series of financial inclusion policies and initiatives to promote digital payments. In 2021 Nigeria introduced a CBDC, the eNaira, to fulfill several goals in financial development and stability as well as to promote financial inclusion. The adoption was slower than expected despite the fact that it offered customers the possibility to create an eNaira wallet without an official ID or a bank account. Factors including low trust in government, poor communication around the rollout, and technical issues with the wallet app also affected the low uptake. The second phase was introduced in August 2022 with the specific goal of onboarding unbanked and underserved groups.

RISE conducted a small-scale qualitative research project in Greater Jakarta in May 2022 to explore emerging payment systems and financial inclusion (contrasting cash and digital dependency and the entanglement between the two, exploring the pros and cons). We selected 12 women entrepreneurs (between 20 and 50 years old) based on their regular mode of payment: heavy cash users conduct transactions mostly using cash, mixed cash and digital users frequently transition between cash and digital, and heavy digital users conduct transactions mostly using digital payments. The research respondents were owners of various microbusinesses: hairdresser, bakery, food box, merchandise production, fish farming, make-up artist, poultry, catering, clothing, and retail product distributor. They also promoted and sold their products in multiple super-apps and e-commerce platforms.

RISE conducted a small-scale qualitative research project in Greater Jakarta in May 2022 to explore emerging payment systems and financial inclusion (contrasting cash and digital dependency and the entanglement between the two, exploring the pros and cons). We selected 12 women entrepreneurs (between 20 and 50 years old) based on their regular mode of payment: heavy cash users conduct transactions mostly using cash, mixed cash and digital users frequently transition between cash and digital, and heavy digital users conduct transactions mostly using digital payments. The research respondents were owners of various microbusinesses: hairdresser, bakery, food box, merchandise production, fish farming, make-up artist, poultry, catering, clothing, and retail product distributor. They also promoted and sold their products in multiple super-apps and e-commerce platforms.

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

This post shares the results of our survey in five provinces in Indonesia and reveals three obstacles to the broader adoption of digital payments.

CBDC Field Research Insights for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”

The Reserve Bank of India (RBI), India’s central bank, announced the pilot launch of the Digital Rupee (e₹), a central bank digital currency (CBDC), in October 2022. The first pilot Digital Rupee in the wholesale segment (e₹-W) began on November 1, 2022, and over the next few months, RBI plans to launch the Digital Rupee in the retail segment (e₹-R) for customers and merchants.

This 2023 report uniquely focuses on users, especially society’s most vulnerable, and is an interdisciplinary collaboration between the MIT Digital Currency Initiative and Maiden Labs, funded by the Gates Foundation. Findings are drawn from: 

-design research to identify the important open technical design choices and ways forward for CBDC; 

-infrastructure research on existing money technologies to understand the broader public-private dynamics in which CBDC financial inclusion issues are centered; 

-and fieldwork to understand the financial experiences of people in four low- and middle-income countries (India, Indonesia, Nigeria, and Mexico) and the ways existing money technologies are failing them or helping them flourish.

For policymakers, technologists, financial-inclusion advocates, and social scientists interested in CBDCs’ risks and opportunities, this report's insights include concrete areas for focus, ideas for design directions, and recommendations for future research. It is a resource for anyone wishing to understand how we can design a digital currency that expands financial inclusion and operates in the public interest, rather than one that exacerbates or even creates a new digital divide for currency.

Executive Summary for the 2023 Report, “CBDC: Expanding Financial Inclusion or Deepening the Divide? Exploring Design Choices that Could Make a Difference”.