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  • J Huang and S Pettigrove

Privacy please: RBA CBDC survey finds consumers will pay for privacy

Updated: Apr 19

The Reserve Bank of Australia (RBA) has published a research paper exploring the merits of a retail central bank digital currency (CBDC), focusing on the extent to which consumers would value having access to a digital form of money that is "even safer and potentially more private" than commercial bank deposits.

The paper, titled Valuing Safety and Privacy in Retail Central Bank Digital Currency, contains the results of research on a selected group of consumers to learn how much they are willing to pay for added safety and privacy characteristics of a CBDC.

According to the RBA, the results suggest

the average consumer attaches no value to the added safety of a CBDC.

On the other hand, an average consumer may a CBDC's privacy benefits:

Privacy settings of a CBDC, which can take various forms, look more consequential for the CBDC value proposition.

According to the RBA, consumer's lack of interest in added safety is unsurprising, as

This is consistent with bank deposits in Australia already being perceived as a safe form of money, and physical cash issued by the Reserve Bank of Australia continuing to be available as an alternative option.

The RBA's research used a technique called "discrete choice experiment", which the paper says is designed specifically for assessing public valuations of goods without markets. This technique involves the RBA asking respondents to choose which bank account with randomised features they would find more attractive. The full set of features are shown in the table below (the respondent only saw one option for each account):

The survey sought to assess consumers' willingness to pay for the safety or privacy benefits of a CBDC by average Australian consumers. The RBA's findings are summarised in the table below:

According to the RBA, for Australians to value a retail CBDC enough to justify issuance,

the CBDC would need to deliver a value proposition other than safety.

This could be the privacy benefits brought by CBDCs, as

The average consumer values transaction anonymity and, to the extent that transaction data do need to be shared with other entities, the average consumer cares about who those entities are.

However, the RBA concedes that the technique they used for the survey is not perfect. For example, consumers may be affected by a psychological effect called "anchoring" when responding to the survey:

Since each participant chooses between the accounts displayed, they reveal only whether their valuation of the combined difference in safety and privacy characteristics is higher or lower than the difference in fees. There is no opportunity for individuals to offer their exact valuation.

There might also be a sampling bias, as the consumers who refused to participate in the survey might be those who have stronger privacy preferences:

this would introduce a form of sample selection that downwardly biases our estimates of privacy... For example, people that are most averse to sharing data with government agencies might be those that are most likely to refuse to participate in an RBA-branded survey.

Despite the paper's apparently broad scope, the questions posed to consumers were in fact quite narrow and rather limiting, focusing only on whether consumers are willing to pay for certain features. On one view, the research does not determine one way or another whether there is consumer appetite for a CBDC generally, or explore other benefits or use cases for a CBDC. This would require a broader set of questions and policy considerations. The key takeaway appears to be that consumers value privacy and are willing to pay for it, whether that is in the form of a CBDC or a traditional bank deposit.

The paper is a continuation of the RBA's research and development efforts on CBDCs following its successful CBDC pilot which identified several potential innovation benefits of a CBDC. The RBA and Treasury are expected to publish a joint report around the middle of 2024 that will provide a stocktake on their CBDC research in Australia and set out a roadmap for future work.

Written by Jake Huang and Steven Pettigrove


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