[Vol.28 No.4] CBDC and Card Payment Market

CBDC payment market card fee optimal CBDC rate financial inclusion
Research Planning & Coordination Team(82-2-759-5490)

Author: Yeongwoong Do(Bank of Korea)

 I looked into the impact of the introduction of CBDC in Korea on the payment market variables like card fees and social welfare by extending the static model in Li, McAndrews, and Wang(2020). The optimal CBDC remuneration rate, the concept of benefits paid to the transaction volume, was estimated at 59bp which is equal to the transaction cost of cash for consumers. But the optimal rate can be changed by specific designs such as accessibility and protection of privacy. The introduction of CBDC can improve social welfare through two channels. The first direct channel is that they can provide consumers with a better means of payment than cash. The second indirect channel comes from the reduction of card fees and the price of trading goods due to the reaction of the card network to defend their business area from CBDC. The introduction of CBDC lowers the hurdle for card usage, which has a positive effect on financial inclusion but can widen inequality due to the regressive-transfer structure of the benefits.

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