Attitudes to ‘Digital Pound’ under the microscope

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The University of Manchester’s Centre for Financial Technology Studies, with support from the Digital Pound Foundation, has released a new report titled “Paths to Success for a Digital Pound: A Research Note on Consumer Attitudes to Adoption“. Authored by Andrew Buckley, Vasileios Karountzos, and Professor Markos Zachariadis, the report explores consumer perspectives on a Digital Pound by simulating its use inside a banking app for university students, prompting them to explore its use and benefits. This approach provided insights into consumer understanding and potential adoption drivers.

Central banks globally are investigating digital monetary technologies, with several considering Central Bank Digital Currencies (CBDCs). Examples include China’s e-CNY trials and projects by the European Central Bank, Bank of England (BoE), and the Federal Reserve. Despite over 100 countries exploring CBDCs, only a few small markets have implemented them.

CBDCs represent a secure, efficient, and inclusive payment system. Studies show declining cash use and the need for digital equivalents, enhancing financial inclusion and providing better monetary policy tools. Design considerations include wholesale vs. retail CBDCs, privacy, and technology. The challenge lies in ensuring cybersecurity, integration, scalability, and interoperability.

CBDCs could improve payment efficiency and reduce transaction costs but might impact commercial banks by shifting deposits to central banks. They could also enhance monetary policy transmission. Research shows consumer and central bank roles are crucial for successful implementation, with a focus on consumer empowerment and seamless integration.

Dr. Andrew Buckley notes that a UK Digital Pound would coexist with cash, ensuring central bank money’s availability in a digital economy while safeguarding monetary sovereignty against foreign digital currencies. He stresses that consumer adoption is vital, as past payment innovations often failed due to lack of user uptake. CFTS research suggests that ease of use, effective design, seamless integration, and government incentives are crucial for adoption.

The maxim “What does not scale, does not matter” is relevant to CBDCs. Historical data shows many innovative payment services failed without consumer adoption. Although many papers discuss CBDC strategies, understanding consumer attitudes towards a Digital Pound remains under-researched. This report aims to fill this gap and identify areas for further investigation.

Dr. Buckley, with extensive experience in banking and payments, asserts that a Digital Pound would bolster UK payment resilience and innovation. The Bank of England and HM Treasury anticipate its necessity for monetary stability and modern financial systems. However, technical implementation without consumer adoption won’t meet public policy objectives or justify development costs.

This report from the underscores the importance of understanding consumer attitudes, learning from past payment innovations, and ensuring ease of use for a successful Digital Pound launch. Lessons from past innovations, like contactless payments, highlight the importance of practical use cases and integration. Successful examples include Thailand’s PromptPay, driven by government policy and brand awareness, versus the failed UK PayM service. Thus, customer experience and seamless integration are vital for CBDC adoption.

Read the full report here.

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