Ben co-leads the Bank’s digital currency research initiative with Scott Hendry (FBD). His current focus is studying the potential roles of the central bank in retail payments and, in particular, the issuance of central bank digital currency.
The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future.
This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes.
Recent data show that the use of credit cards in Canada has been increasing, while the use of cash has been declining. At the same time, only two-thirds of small or medium-sized businesses accept credit cards.
The emergence of digital currencies such as Bitcoin and the underlying blockchain and distribution ledger technology have attracted significant attention. These developments have raised the possibility of considerable impacts on the financial system and perhaps the wider economy.
Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.