## 10. Providing incentives to boost JAM-DEX adoption in Jamaica

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### Key findings on Jam-Dex adoption
- Low adoption attributed to "insufficient public education and challenges in onboarding merchants."
- Merchant onboarding friction: merchants initially required to upgrade POS devices to accept Jam-Dex.
- Intermediary alignment issue: "The lack of incentivization or mandate for commercial banks to modify ATMs for Jam-Dex conversion also posed challenges to adoption efforts."

### Ongoing CBDC adoption challenges illustrated by other jurisdictions
- The Bahamas (Sand Dollar):
  - Low adoption tied to "a lack of merchant participation in the Sand Dollar network and lack of integration with the traditional banking system for merchant accounts."
  - Banks and credit unions exhibited slow engagement; shortcomings in customer education.
- ECCU (DCash):
  - Shortcomings in user education and merchant network development.
  - Lack of integration of DCash with merchant POS devices and legacy financial systems.
  - A two-month system outage and lack of timely communication hurt confidence; DCash pilot stopped in January 2024 to allow transition to DCash 2.0.
- Nigeria (eNaira):
  - Phased approach granting access only to customers with bank accounts and restricting transactions to domestic usage contributed to slow uptake.
  - "98.5 percent of eNaira wallets were unused one year after its launch."
- China (e-CNY):
  - "16.5 billion yuan in circulation and 120 million wallets opened as of June 2023."
  - e-CNY equals "0.16 percent of China's M0 money supply."
- India (digital rupee):
  - As of May 2024, "the e-rupee in circulation stood at 3.23 billion rupees, up from 1 billion rupees in December 2023."
  - This compares with "35.4 trillion rupees in banknotes currently in circulation."

### Measuring CBDC adoption (implications for Jam-Dex KPIs)
- Adoption metrics to consider:
  - Number of individuals registered for CBDC wallets.
  - CBDC transaction volume and transaction value.
  - Percentage of previously unbanked individuals using CBDC.
  - Number or size of CBDC transactions processed daily by merchants.
  - Share of merchants accepting CBDC.
  - Share of financial institutions that make CBDC available to their customers and the amount of CBDC provided to end-users.
- Central bank guidance on KPIs:
  - Set realistic KPIs and success metrics aligned to policy objectives rather than prescribing universal KPI targets.
  - KPIs should measure whether the CBDC is "moving the needle" on target policy goals and be read alongside impacts on the general payment ecosystem and financial stability.

### Stakeholder dynamics and implications for incentives
- Chicken-and-egg dynamic:
  - Consumer adoption depends on merchant participation; merchant participation depends on consumer usage — creating a need for balanced incentives across both groups.
- Two-tier distribution model:
  - Most central banks explore a two-tier model where distribution is facilitated through intermediaries to reach end-users and leverage existing financial infrastructure.
- Consumer-facing intermediaries:
  - Commercial banks, credit unions, fintech, Big Tech firms, mobile network operators, e-money providers, postal operators, or government agencies (for wallet/identity services, onboarding, account management, customer support).
- Merchant-facing intermediaries:
  - PSPs, merchant acquirers, sub-acquirers, payment system facilitators, independent sales operators (ISOs) — responsible for merchant onboarding, technical support, dispute resolution, and value-added services.
- Developers/technology providers:
  - Responsible for infrastructure, interoperability, offline functionality, security, and scalability.
- Government entities and regulators:
  - AML/KYC, data protection, competition, cybersecurity authorities can act as advocates and beneficiaries by integrating CBDC into tax collection, ID systems, and public services.

### Evidence on user engagement from the CBDC Adoption Questionnaire
- Strong latent interest in one jurisdiction’s demo/perception survey:
  - "98.7 percent of users expressed eagerness to learn more about CBDC, and 79.7 percent revealed a strong inclination to use CBDC once launched."
- Early engagement should focus on users’ needs and pain points (e.g., high transaction fees, cash availability), not only on hypothetical willingness to use CBDC.

### Policy options and incentives relevant to boosting Jam-Dex adoption
- Public education and communication:
  - Increase public education to build awareness and trust; address questions such as: What is a CBDC? How does it differ from other forms of money? Will it replace cash and mobile money? How will my privacy be protected?
- Reduce merchant onboarding frictions:
  - Mitigate or subsidize POS upgrades required to accept Jam-Dex.
  - Improve integration with existing merchant POS devices and legacy payment systems.
- Align intermediary incentives:
  - Consider mandates or incentives for commercial banks to modify ATMs for Jam-Dex conversion or cash-in/cash-out interoperability.
  - Understand and address intermediaries’ business-model concerns (potential loss of profits, increased operational costs) to make participation mutually beneficial.
- Leverage two-tier distribution and a broad intermediary mix to scale reach.
- Use targeted pilots and demos (including wallet creation and topping up) coupled with perception surveys to refine product-market fit.
- Monitor adoption with jurisdiction-specific KPIs tied to policy objectives and track unintended consequences, including financial stability risks.

### Specific incentive programs announced for JAM-DEX (Box 10)
- Announcement timing:
  - Bank of Jamaica (March 2023) — Gov’t Provides Incentives to Boost JAM-DEX Use.
- Small/Micro Merchant Incentive Program:
  - Target: small businesses such as restaurants, gas stations, and personal-care services.
  - Incentive: The first 10,000 merchants onboarded as of April 1, 2023, will receive JD$25,000 worth of JAM-DEX upon registration and onboarding.
  - Additional benefit: Onboarded merchants will receive a “JAM-DEX Accepted Here” sticker for display at their locations.
  - Eligibility/documentation requirements: Business registration certificates; Proof of bank account; Valid tax compliance certificates.
- Wallet-holder Individual Loyalty Program:
  - Start date: April 1, 2023.
  - Incentive: Users will receive two percent cashback on total purchases for goods and services in JAM-DEX.
  - Limit: Cashback applies up to a maximum spend of JD$5,000.
  - Loyalty points mechanics: Loyalty points earned will be applied to the user's wallet at the end of each month.
- Temporal and scope limitations:
  - These initiatives are applicable only for the 2023/24 financial year.
- Relevance to broader policy trade-offs:
  - Programs exemplify measures to calibrate adoption while balancing potential tensions between promoting adoption and preserving financial stability, sustainability (cost recovery, public funding, or sharing costs with intermediaries), integrity concerns (privacy, tiered KYC, cybersecurity, and data monetization trade-offs).

### Cross-cutting lessons for incentive design (drawn from broader boxes and questionnaire)
- Subsidies and cost-reduction for intermediaries:
  - Lower entry costs and/or provide subsidies for consumer-facing intermediaries (e.g., distributors) to encourage participation.
  - CBDC Adoption Questionnaire: 25 percent of respondents stated no subsidies will be provided, and 13 percent intend on providing subsidies.
- Merchant and user incentives:
  - Onboarding incentives: sign-up bonuses, airdrops, or lotteries to encourage initial uptake (examples: Jamaica JD$2,500 airdrop to first 100,000 registrants after April 1, 2022; China airdropped 200 e-CNY to selected residents in October 2020).
  - Usage incentives: rewards for regular use—cash-back offers (Jamaica: consumers will receive two percent cashback on purchases using the Jam-Dex), discounts, loyalty points.
  - Merchant-specific incentives: subsidies for initial setup costs, reduced transaction fees for the first year, tax exemptions, or rewards for achieving certain transaction volumes (example: Morocco five-year total exemption from taxes for transactions made by mobile payment with small merchants).
- Intermediary business model considerations:
  - Permit intermediaries to build and charge for value-added services to create direct revenue streams.
  - Allow monetization of end-user data with user consent; questionnaire: 50 percent of respondents are undecided about intermediaries collecting and utilizing CBDC transaction data.
- Operational measures:
  - Offer white-label wallet solutions to reduce development costs for smaller intermediaries.
  - Provide documented APIs, SDKs, sandboxes, and hold hackathons to encourage developer participation.
  - Phase pilots iteratively to validate stakeholder readiness and user interactions.

*IMF Fintech Note (content unit: 10. Providing incentives to boost JAM-DEX adoption in Jamaica).*

### Annex 1. CBDC Adoption Questionnaire Findings ..........................................................................

### Annex 1. CBDC Adoption Questionnaire Findings

### Contents overview
- Annex 1. CBDC Adoption Questionnaire Findings ............................................................................... 36
- Annex 2. Sample KPIs for CBDC Adoption ............................................................................................ 46
- Annex 3. Existing Market Structures Relevant for the CBDC Ecosystem .......................................... 48

### Figures listed
- Figure 1. Stakeholders within the CBDC Ecosystem ............................................................................................... 6
- Figure 2. The REDI Framework for CBDC Adoption .............................................................................................. 11

### Boxes listed
- Box 1. Stakeholder engagement on CBDC in Peru ............................................................................................. 9
- Box 2. Digital ruble fees for businesses in Russia ............................................................................................. 16
- Box 3. Leveraging creative content to educate users about UPI in India .......................................................... 18
- Box 4. Issuing a consultation paper on the digital pound in the U.K. ................................................................. 19
- Box 5. Deploying Sand Dollar Ambassadors in The Bahamas .......................................................................... 20
- Box 6. Testing offline eAUD payments on campuses in Australia ..................................................................... 22
- Box 7. Making e-CNY wallets available to short-term visitors in China ............................................................. 23
- Box 8. Scaling P2P payments and beyond via Swish in Sweden ...................................................................... 25
- Box 9. Paying employee benefits with e-Rupee in India .................................................................................... 25

*ftnea2024005 - Annex 1. CBDC Adoption Questionnaire Findings*

### 10. Providing incentives to boost JAM-DEX adoption in Jamaica ..........................................................

### 10. Providing incentives to boost JAM-DEX adoption in Jamaica

### Key findings on JAM-DEX adoption in Jamaica
- Low adoption rates of the Jam-Dex were attributed to "insufficient public education and challenges in onboarding merchants."
- Merchants were initially required to upgrade POS devices to accept Jam-Dex.
- "The lack of incentivization or mandate for commercial banks to modify ATMs for Jam-Dex conversion also posed challenges to adoption efforts."

### Ongoing CBDC adoption challenges illustrated by other jurisdictions
- The Bahamas (Sand Dollar): low adoption tied to "a lack of merchant participation in the Sand Dollar network and lack of integration with the traditional banking system for merchant accounts"; banks and credit unions exhibited slow engagement; shortcomings in customer education.
- ECCU (DCash): shortcomings in user education and merchant network development; lack of integration of DCash with merchant POS devices and legacy financial systems; a two-month system outage and lack of timely communication hurt confidence; DCash pilot stopped in January 2024 to allow transition to DCash 2.0.
- Nigeria (eNaira): phased approach granting access only to customers with bank accounts and restricting transactions to domestic usage contributed to slow uptake; "98.5 percent of eNaira wallets were unused one year after its launch."
- China (e-CNY): "16.5 billion yuan in circulation and 120 million wallets opened as of June 2023"; e-CNY equals "0.16 percent of China's M0 money supply."
- India (digital rupee): as of May 2024, "the e-rupee in circulation stood at 3.23 billion rupees, up from 1 billion rupees in December 2023"; this compares with "35.4 trillion rupees in banknotes currently in circulation."

### Measuring CBDC adoption (implications for Jam-Dex KPIs)
- Adoption can be measured by:
  - Number of individuals registered for CBDC wallets.
  - CBDC transaction volume and transaction value.
  - Percentage of previously unbanked individuals using CBDC.
  - Number or size of CBDC transactions processed daily by merchants.
  - Share of merchants accepting CBDC.
  - Share of financial institutions that make CBDC available to their customers and the amount of CBDC provided to end-users.
- Central banks are encouraged to set realistic KPIs and success metrics aligned to policy objectives rather than prescribing universal KPI targets.
- KPIs should measure whether the CBDC is "moving the needle" on target policy goals and be read alongside impacts on the general payment ecosystem and financial stability.

### Stakeholder dynamics and implications for incentives
- CBDC adoption exhibits a "chicken-and-egg" dynamic: consumer adoption depends on merchant participation; merchant participation depends on consumer usage — creating a need for balanced incentives across both groups.
- Most central banks explore a two-tier model where distribution is facilitated through intermediaries to reach end-users and leverage existing financial infrastructure.
- Consumer-facing intermediaries: commercial banks, credit unions, fintech, Big Tech firms, mobile network operators, e-money providers, postal operators, or government agencies (for wallet/identity services, onboarding, account management, customer support).
- Merchant-facing intermediaries: PSPs, merchant acquirers, sub-acquirers, payment system facilitators, independent sales operators (ISOs) — responsible for merchant onboarding, technical support, dispute resolution, and value-added services.
- Developers/technology providers: responsible for infrastructure, interoperability, offline functionality, security, and scalability.
- Government entities and regulators (AML/KYC, data protection, competition, cybersecurity) can act as advocates and beneficiaries by integrating CBDC into tax collection, ID systems, and public services.

### Evidence on user engagement from the CBDC Adoption Questionnaire
- In one jurisdiction’s demo and perception survey: "98.7 percent of users expressed eagerness to learn more about CBDC, and 79.7 percent revealed a strong inclination to use CBDC once launched."
- Early engagement should focus on users’ needs and pain points (e.g., high transaction fees, cash availability), not only on hypothetical willingness to use CBDC.

### Policy options and incentives relevant to boosting Jam-Dex adoption (based on lessons and ecosystem dynamics)
- Increase public education and communication to build awareness and trust (address questions such as: What is a CBDC? How does it differ from other forms of money? Will it replace cash and mobile money? How will my privacy be protected?).
- Reduce merchant onboarding frictions:
  - Mitigate or subsidize POS upgrades required to accept Jam-Dex.
  - Improve integration with existing merchant POS devices and legacy payment systems.
- Align intermediary incentives:
  - Consider mandates or incentives for commercial banks to modify ATMs for Jam-Dex conversion or cash-in/cash-out interoperability.
  - Understand and address intermediaries’ business-model concerns (potential loss of profits, increased operational costs) to make participation mutually beneficial.
- Leverage a two-tier distribution model and engage a range of consumer-facing and merchant-facing intermediaries to scale reach.
- Use targeted pilots and demos (including wallet creation and topping up) coupled with perception surveys to refine product-market fit.
- Monitor adoption with jurisdiction-specific KPIs tied to policy objectives and track unintended consequences, including financial stability risks.

*IMF Fintech Note (content unit: 10. Providing incentives to boost JAM-DEX adoption in Jamaica).*

### Box 1. Stakeholder engagement on CBDC in Peru

### Box 1. Stakeholder engagement on CBDC in Peru

### IMF technical assistance mission and workshop objectives
- In 2023, the IMF conducted a technical assistance mission to support the Banco Central de Reserva del Peru (BCRP) in their engagement with stakeholders as part of their research and development on CBDC.
- Primary goal: enhance BCRP's direct stakeholder engagement to understand stakeholders' perspectives on a potential CBDC through a two-day interactive workshop with stakeholders.
- Invitations were extended to diverse stakeholders within the Peruvian payments ecosystem, including banking and stock market regulators, PSPs, card networks, fintech and technology providers.

### Workshop format and focus
- Two-day interactive workshop facilitating open dialogue and co-creation between stakeholders and central bank staff.
  - Day 1 focus: stakeholder reactions following the BCRP's CBDC white paper publication.
  - Day 2 focus: designing a collaborative engagement program.
- Outcome: brainstorming that identified key activities and recommendations for BCRP to prioritize for the next phase of work.

### Key implications for central bank stakeholder engagement
- The workshop demonstrated the central bank’s commitment to collaboration and inclusive decision-making on CBDC by directly involving stakeholders in the process.
- Direct stakeholder involvement contributed to:
  - Better understanding of stakeholder perspectives and concerns.
  - Co-creation of an engagement program and prioritization of next-phase activities.

### Context within the REDI Framework (transition)
- The Box appears within a section introducing the REDI Framework, which guides policymakers on regulatory strategies, communication initiatives, design choices, and incentive mechanisms to facilitate CBDC adoption.
- Relevant REDI elements highlighted in surrounding text (contextual linkage to the workshop):
  - Regulation: intermediary entry, CBDC legal tender status, oversight of user fees, establishment of quality standards.
  - Education: simplifying information and making it universally accessible to build trust and counter misinformation.
  - Design and Deployment: prioritizing design, features, branding, user experience, roll-out plans, onboarding, and acceptance point expansion.
  - Incentives: monetary and non-monetary incentives for end-users and intermediaries to encourage active participation.

*International Monetary Fund (October 2023) IMF Technical Assistance Report: Peru CBDC Stakeholder Engagement*

### Box 2. Digital ruble fees for businesses in Russia

### Box 2. Digital ruble fees for businesses in Russia

### Digital ruble fees and deployment timeline
- Starting on January 1, 2025, the Bank of Russia (CBR) will set fees for transactions involving digital rubles.
- Fees for businesses accepting payments for goods and services:
  - 0.3 percent of the transaction amount, capped at ₽1,500.
- Fees for housing and utility companies:
  - 0.2 percent, with a maximum limit of ₽10.
- Business-to-business transfers:
  - fixed fee of ₽15 per transaction.
- Transitional arrangements:
  - Until the effective date, the CBR will implement a zero-fee period for digital ruble transactions on its platform.
  - Individuals and businesses can open a digital ruble account on the CBR’s platform without any fees.
- Pilot testing and rollout:
  - The pilot testing of the digital ruble is be completed in several stages during 2023 and 2024, involving a limited number of clients from 13 banks, with a gradual adoption expected to begin in 2025.
- Official action cited:
  - Bank of Russia (August 3, 2023) — Fees for digital ruble transactions approved.

### Establishing minimum quality standards for services
- Central banks can establish technical and operational standards for services within their CBDC ecosystem, including benchmarks for end-user experience, privacy, and security; applicability depends on local legislative frameworks and the technological landscape.
- Trade-offs:
  - Minimum quality standards can enhance user trust and systemic stability by guaranteeing secure and efficient transactions.
  - Quality standards can increase implementation costs for parties that must meet them, posing challenges for smaller intermediaries.
- Mitigating measures:
  - Central banks can provide a "white-label" wallet to smaller intermediaries to meet prescribed quality standards and support a level playing field.
  - Proportional regulation: establish basic security and efficiency standards for all intermediaries and apply more stringent requirements for larger (or more critical) intermediaries.
  - Support for smaller operators through technical assistance or phased implementation periods.
- Standardization versus differentiation:
  - Standardization benefits:
    - level playing field, eased regulatory compliance, reduced fragmentation, consistent user experiences, simplified switching for end-users.
    - Example: Brazil's Pix standardizes UX/UI and a standardized API, simplifying switching and integration.
  - Potential downside of standardization:
    - May limit innovation and reduce incentives for intermediaries to develop new technologies and services.
  - Differentiation benefits:
    - Addresses distinct needs/preferences of specific end-user segments via loyalty programs, personalized advice, niche payments, enhanced security, UX customization, value-added analytics.

### Education and communication strategies
- Central banks' coordination role:
  - Central banks should lead CBDC communication and educational efforts while leveraging industry partners for consumer education.
- Key communication objectives and approaches:
  - Provide clear and easy-to-understand information on CBDC benefits and counteract misinformation.
  - Guide consumers step-by-step on securely handling digital wallets, conducting transactions, and monitoring holdings; promote understanding of associated risks such as cyber threats.
  - Offer information in multiple languages where populations are ethnically diverse or multilingual.
  - Tailor messages by segmenting audiences (consumers, merchants, intermediaries) and emphasize privacy features and fee transparency where relevant.
  - Integrate CBDC education with broader financial literacy programs to enhance understanding of CBDC as a financial inclusion instrument.
- Reported user misconceptions from CBDC Adoption Questionnaire:
  - Some users mistakenly viewed CBDC as a cryptocurrency.
  - Some users misunderstood interoperability, believing they must activate multiple digital wallets.
  - Central bank messaging focused on explaining CBDC versus cryptocurrency, interoperability across available digital wallets, and convenience for day-to-day spending; marketing/PR firms assisted.
- Educational resources for intermediaries:
  - Provide in-depth technical and operational information to banks and service providers to help them plan and adapt systems and processes.
  - Example: The Federal Reserve offers educational content on the FedNow Service, including an online Instant Payments University and resources such as Q&A, interviews, technical overview, and planning guide. (FedNow Service introduced in July 2023).

### Leveraging industry partners and outreach channels
- Two-way engagement:
  - Collaborate with banking associations, Fintech associations, merchant associations, business chambers for public consultations, surveys, and polls to collect feedback.
  - Example: Bank of England issued a Consultation Paper on the digital pound; Bank of Thailand published a directional paper with an online feedback form.
- Use of credible partners and influencers:
  - Identify industry experts, community leaders, and credible figures to create reviews, tutorials, testimonials, and to humanize CBDC concepts.
  - Collaborate with schools and universities to reach younger populations; Hungary conducted a retail CBDC pilot among 8–14-year-old students.
- In-person outreach to last-mile communities:
  - Work with local organizations or regional authorities to organize roadshows and distribute materials to communities with limited digital infrastructure or financial literacy.
  - Example: Central Bank of The Bahamas recruited Sand Dollar Ambassadors in March 2023; recruitment of the first batch completed by April 2023. Ambassadors provide assistance in New Providence, Grand Bahama, and the Family Islands and participate in outreach through 2023 and 2024.
- Communication channels and media mix:
  - Launch a dedicated portal as an official “one stop shop” for CBDC information (webpages, FAQs, live chat, hotlines).
  - Example: European Central Bank has a dedicated webpage to the digital euro with FAQs and podcasts.
  - Deploy a combination of traditional and social media for broad outreach: press releases, press conferences, infographics, videos, podcasts, and active social media presence.
- Consultation outcomes example:
  - The Bank of England and HM Treasury Consultation Paper (February 2023) received over 50,000 responses; among online respondents, 99 percent identified themselves as individuals and 1 percent represented organizations. Key concerns included cash accessibility, privacy, and financial autonomy.

### Design, deployment, and use-case expansion
- User-centric design priorities:
  - Ensure universal access, user-friendly UX/UI, intuitive multilingual interfaces, simple transaction processes, compatibility across devices, 24/7 availability, instant settlement, and interoperability with bank accounts and other digital wallets.
  - Incorporate robust encryption, two-factor authentication, and transaction alerts for security.
  - Consider access issues based on cell, internet and electricity coverage, device costs, and disabilities; include solutions for blind, deaf, and cognitively impaired users.
- Expand use cases to boost utility and adoption:
  - Support offline functionalities and programmable payments; potential applications include P2P payments, merchant payments, bill payments, cross-border transactions, scheduling future payments, bulk payments, and request-to-pay functionalities.
  - Evidence: Frost and others (2024) find greater monthly volume growth in FPS transactions with increased number of use cases and cross-border connections.
  - Examples of use-case piloting and proposals:
    - Reserve Bank of Australia invited industry proposals including enhancing government program delivery, collecting/crediting general sales tax, automating utility and rental payments, facilitating micropayments, time-based streaming payments, and wage payments.
    - An Australian pilot demonstrated CBDC supporting uninterrupted financial transactions during emergencies and enabling accessibility for those with limited technological skills or internet access using NFC and Bluetooth for device-to-device transactions.
    - Expanding CBDC access to non-local users, such as tourists, can broaden the user base (example noted: China).

*Source: ftnea2024005 - Box 2. Digital ruble fees for businesses in Russia*

### Box 6. Testing offline eAUD payments on campuses in Australia

### Box 6. Testing offline eAUD payments on campuses in Australia

### Overview
- Southern Cross University conducted an eight-week pilot program to test the use of a CBDC for offline payments at on-campus vendors.
- The pilot was run in partnership with ANZ Bank.

### Pilot design and context
- A number of students were provided with NFC-enabled smartcards pre-loaded with eAUD to make purchases at selected vendors.
- Pilot locations: the universities’ Gold Coast and Northern Rivers campuses.
- The initiative was prompted in part by the 2022 Northern Rivers floods, which disrupted traditional banking services for weeks.
- Objective: to showcase how a university, or similar organizations, can use CBDC to provide immediate financial support in emergency situations where online connectivity is unavailable.

### Findings and user experience
- Students found the use of eAUD for purchases to be as seamless as traditional payment methods.
- eAUD offered certainty in scenarios where internet access is compromised.

### Implementation notes and implications
- Offline-capable CBDC distribution via NFC-enabled smartcards can enable transactions without online connectivity for the recipient and merchant.
- Use case demonstrated: delivery of immediate financial support in localized emergency scenarios (e.g., flood-affected regions) where conventional banking infrastructure is disrupted.
- Institutional settings (universities or similar organizations) can serve as practical pilots for operationalizing offline CBDC payments in emergencies.

*Source: ftnea2024005 - Box 6. Testing offline eAUD payments on campuses in Australia*

### Box 9. Paying employee benefits with e-Rupee in India

### Box 9. Paying employee benefits with e-Rupee in India

### Pilot implementation and recent developments
- The RBI launched the e-rupee pilot in December 2022 to provide a digital alternative to physical cash.
- Since December 2023, several banks in India have begun using the e-rupee to disburse employee benefits to employees’ e-rupee wallets instead of to their salary accounts.
- This initiative helped the e-rupee meet the Reserve Bank of India’s (RBI) target of one million transactions per day.
- Transactions initially averaged 25,000 a day by the end of October 2023; linking the e-rupee to the UPI broadened its use case.
- User-base growth:
  - 3 million users in December 2023
  - about 4 million users in January 2024
- Reuters (2024) reported: "India's digital currency transactions top 1 mln/day in Dec."

### Risks and governance considerations
- Mandating any group of users (staff or non-staff) could generate conflicts of interest where a regulated institution is mandating use of a certain product; liability would be unclear in the event of failure or disruption.
- Mandatory use may restrict access and choice for a demographic, posing regulatory and competition issues in certain countries.

### Operational and onboarding recommendations
- Leverage intermediaries to offer both physical registration and eKYC for onboarding users:
  - Physical registration points (bank branches, designated registration centers) for users less comfortable with digital technologies.
  - eKYC procedures using digital ID and/or biometrics for digitally savvy users.
  - Leverage aliases (phone numbers, email addresses, QR codes) to simplify onboarding.
  - One jurisdiction will allow self-onboard for lowest tier wallets without KYC/AML, testing before wider public launch.
- Leverage local intermediaries to provide cash-in/cash-out points:
  - Banks for account opening and conversion of cash/bank deposits to CBDC.
  - Enable physical currency withdrawals from ATMs using CBDC balances.
  - Use postal networks, shops, supermarkets, and retail outlets—model used successfully by mobile money systems (M-PESA).
  - Example: There are over 600,000 active agents in the M-PESA network across Kenya, Tanzania, the Democratic Republic of Congo, Mozambique, Lesotho, Ethiopia, Egypt.
- Conduct iterative pilots before launch:
  - Adopt flexible, iterative pilots to validate stakeholder readiness and user interactions.
  - IMF’s 5P methodology proposed to guide policymakers in managing CBDC projects.

### Incentives: intermediaries
- Lower entry costs and/or provide subsidies for consumer-facing intermediaries (e.g., distributors):
  - Policymakers can subsidize initial system development, integration, operational costs, waive participation fees.
  - Example: Indian government subsidies were crucial for UPI intermediary participation where intermediaries were not permitted to charge end-user fees.
  - Example: FedNow reduced fees to boost adoption—eliminating the US$25 monthly fee (saving $300 annually) and reducing the US$0.045 fee per credit transfer for the first 2,500 transfers each month, potentially saving up to $1,350 a year.
  - CBDC Adoption Questionnaire findings: 25 percent of respondents stated no subsidies will be provided, and 13 percent intend on providing subsidies.
- Minimize fixed and variable costs of merchant-facing intermediaries (e.g., acquirers):
  - Consider offering CBDC infrastructure as a public good or waiving fees (e.g., inter-PSP/interchange fees).
  - Adopt simpler technologies like QR codes or ensure compatibility with existing QR codes.
  - Brazil’s Pix system prohibits such fees between intermediaries, reducing costs for acquirers.
- Permit intermediaries to build and charge for value-added services to create direct revenue streams and stimulate innovation.
- Allow for monetization of end-user data with user consent:
  - Enables enhanced credit assessments, cross-selling, targeted advertisements, merchant analytics.
  - Raises data privacy concerns; 50 percent of respondents to the CBDC Adoption Questionnaire are undecided about intermediaries collecting and utilizing CBDC transaction data; among the other 50 percent, central banks are working towards allowing PSPs to collect and use CBDC transaction data with consent, in accordance with relevant laws and regulations.
- Impose constraints to diminish the store-of-value appeal of CBDC:
  - Central-bank-imposed holding limits or tiered remuneration can affect intermediaries’ willingness to participate.
  - Examples from literature:
    - Proposed €3,000 digital euro holding cap per individual (Bindseil (2020); Bindseil and Panetta (2020)).
    - Li, Usher, and Zhu (2024) find that in Canada, even a very high holding limit of $25,000 can cause a significant reduction in CBDC holdings.
  - Such constraints may encourage deposit-taking institutions’ participation but could discourage non-depository intermediaries.
- Offer exclusivity agreements to intermediaries:
  - Grant exclusive rights for certain regions or user groups to minimize competition and encourage service delivery (e.g., MNOs in rural areas; commercial banks in urban areas).
  - Careful balance needed to avoid local monopolies; use limited-length contracts to allow later competition.
- Enhance intermediary credibility with CBDC white-label solutions:
  - Central banks can provide white-label wallet solutions that intermediaries rebrand, reducing development costs and leveraging central bank credibility.
  - One jurisdiction reported developing a white-label wallet for firms to rebrand.
  - Example in crypto: Circle introduced Programmable Wallets in August 2023.
- Encourage participation of developers and Fintech firms:
  - Provide documented APIs, SDKs, sandboxes, hackathons.
  - One jurisdiction held a CBDC Hackathon; another uses a Fintech regulatory sandbox.
  - Access to settlement in central bank money and smart contracts/payments may act as an incentive for fintech companies, subject to eligibility and governance.

### Incentives: end-users and merchants
- Offer onboarding incentives:
  - Sign-up bonuses, airdrops, or lotteries to encourage initial uptake.
  - Examples:
    - Jamaica: first 100,000 Jamaicans to register for a Jam-Dex wallet after April 1, 2022, received a JD$2,500 deposit (about US$16).
    - China (October 2020): airdropped 10 million e-CNY to 50,000 residents in Luohu district; each resident received 200 e-CNY (about US$30).
- Offer usage incentives:
  - Rewards for regular use—cash-back offers, discounts, loyalty points.
  - Examples:
    - 2023 Lunar New Year Holiday: regional governments of the e-CNY pilot zones handed out 180 million yuan in digital yuan red packets and discount coupons.
    - Jamaica: consumers will receive two percent cashback on purchases for goods/services using the Jam-Dex.
- Offer merchant-specific incentives:
  - Subsidies for initial setup costs, reduced transaction fees for the first year, tax exemptions, or rewards for achieving certain transaction volumes.
  - Example: Morocco introduced a five-year total exemption from taxes for transactions made by mobile payment with small merchants.

*Source: ftnea2024005 - Box 9. Paying employee benefits with e-Rupee in India (ftnea2024005 - Box 9. Paying employee benefits with e-Rupee in India)*

### Box 10. Providing incentives to boost JAM-DEX adoption in Jamaica

### Box 10. Providing incentives to boost JAM-DEX adoption in Jamaica

### Incentive programs announced
- Two new incentive programs introduced to boost adoption of Jamaica’s CBDC, JAM-DEX.
- Bank of Jamaica (March 2023)  
  Gov’t Provides Incentives to Boost JAM-DEX Use

### Small/Micro Merchant Incentive Program
- Target: small businesses such as restaurants, gas stations, and personal-care services.
- Incentive: The first 10,000 merchants onboarded as of April 1, 2023, will receive JD$25,000 worth of JAM-DEX upon registration and onboarding.
- Additional benefit: Onboarded merchants will receive a “JAM-DEX Accepted Here” sticker for display at their locations.
- Eligibility/documentation requirements:
  - Business registration certificates
  - Proof of bank account
  - Valid tax compliance certificates

### Wallet-holder Individual Loyalty Program (consumer-focused)
- Start date: April 1, 2023.
- Incentive: Users will receive two percent cashback on total purchases for goods and services in JAM-DEX.
- Limit: Cashback applies up to a maximum spend of JD$5,000.
- Loyalty points mechanics: Loyalty points earned will be applied to the user's wallet at the end of each month.

### Temporal and scope limitations
- These initiatives are applicable only for the 2023/24 financial year.

### Relevance to broader CBDC policy considerations (as presented in the source)
- Incentive programs exemplify measures to calibrate adoption while balancing trade-offs identified in the policy discussion, including:
  - Potential tensions between promoting adoption and preserving financial stability.
  - The need to consider sustainability (cost recovery, public funding, or sharing costs with intermediaries).
  - Integrity concerns (privacy, tiered KYC, cybersecurity, and data monetization trade-offs).
  - Use of monetary and non-monetary incentives as part of intermediary and end-user engagement strategies.

*Source: Box 10. Providing incentives to boost JAM-DEX adoption in Jamaica (ftnea2024005).*

### Annex 1. CBDC Adoption Questionnaire

### Annex 1. CBDC Adoption Questionnaire

### Survey scope and response summary
- Questionnaire sent in March 2024 to 26 central banks and monetary authorities.
- Total responses received: 18.
- Regional distribution of respondents:
  - Europe: five jurisdictions.
  - Americas: four jurisdictions.
  - Africa: four jurisdictions.
  - Asia Pacific: four jurisdictions.
  - Middle East: one jurisdiction.
- Respondent central bank names are not disclosed.

### Key findings: perceived benefits of retail CBDC
- Central banks view CBDC as benefiting multiple stakeholders, with benefits varying by stakeholder:
  - For central banks: CBDC as a digital alternative to central bank money; increased financial inclusion.
  - For intermediaries (PSPs, developers): new market opportunities; development of new financial technologies.
  - For users (consumers, merchants): conveniences and cost improvements, including faster transactions and lower transaction costs.
  - For government agencies: enhanced regulatory compliance; increased law enforcement.

### Adoption goals and monitoring
- Adoption targets:
  - Out of 18 respondents, 17 have not set specific adoption targets for CBDC.
  - One jurisdiction noted a target annual growth adoption rate of +20 percent year-over-year but did not specify the base metric.
  - One jurisdiction noted they have no target CBDC adoption rate, analogous to not predetermining banknote usage rates.
- Monitoring and evaluation:
  - Most respondents remain undecided on monitoring frameworks.
  - Examples of established indicators cited by some jurisdictions:
    - Usage by transaction type; amount of CBDC in the hands of the public; number of CBDC wallet holders; CBDC as a percentage of currency in circulation; number of CBDC wallet holders who previously did not have a bank account.
    - Proposed metrics: (i) daily transaction volumes; (ii) number of direct participants (grouped by service level if applicable); (iii) number of indirect participants (e.g., merchants); (iv) number of supporting participants (e.g., technology service providers); (v) uptake of use cases; (vi) transaction throughput; (vii) operating costs.

### Participation of intermediaries (PSPs)
- Encouraging PSP participation via:
  - Technical integration:
    - Design retail CBDC as open infrastructure with low barriers to entry and easy integration with existing systems at minimal configuration costs.
    - Provide APIs and sandbox environments for PSP development and testing.
    - Organize hackathons and innovation challenges.
  - Incentives:
    - Allow intermediaries to charge fees to merchants and other PSPs for CBDC transactions.
    - Establish incentive models that create mutual benefits for stakeholders.
  - Regulations:
    - Enforce mandatory distribution obligations for credit institutions with balanced compensation.
    - Mandate interoperability with CBDC for all new payment platforms.
  - Education and communication:
    - Offer training and technical support to help PSPs upgrade systems.
    - Include banks and nonbanks in advisory groups for input.
- Market view:
  - Except for "Undecided" respondents, 65 percent of central banks envision both (commercial) bank and nonbank PSPs as CBDC wallet providers.

### Participation of developers and fintech firms
- Examples of approaches to foster developer and fintech engagement:
  - Build common, easy-to-access wallet management modules for fintechs and developers.
  - Operate fintech regulatory sandboxes to encourage experimentation with value-added services, user experience design, and pricing models.
- One jurisdiction views a modern payment platform supporting settlements in CBDC and smart contracts as a sufficient incentive for fintechs, subject to reconsideration of access criteria for central bank systems.

### Participation of government agencies
- Use-case support from government agencies in launched/piloted jurisdictions:
  - Government-to-person (G2P) payments, e.g., social welfare disbursements.
  - Require government agencies to accept CBDC for person-to-government payments (e.g., taxes, fees) as part of legal tender status.
  - Encourage agencies, NGOs, and businesses to reward customers in CBDC.
  - Encourage religious organizations to accept and give donations and offerings in CBDC.

### Incentives for individual users and data use
- Pricing and fees:
  - All central banks, except those "Undecided," believe CBDC should be offered without fees to individual users, analogous to cash for basic personal payments.
  - Some foresee intermediaries charging lower fees for value-added services than current payment methods like e-money.
- Transaction data use by intermediaries:
  - 50 percent of respondents are undecided on whether intermediaries could collect and utilize CBDC transaction data as an incentive strategy.
  - The remainder work toward allowing PSPs to collect and use CBDC transaction data with consent and in accordance with relevant laws and regulations, viewing it as potentially enhancing CBDC value.

### Incentives and onboarding for merchants
- Merchant incentives at launch:
  - Except for "Undecided" respondents, most jurisdictions are considering incentives (rewards, loyalty programs) for merchants during initial CBDC launch phases, provided directly by central banks or indirectly via intermediaries.
  - One central bank will not provide direct incentives but will allow PSPs to decide on incentives independently.
- Sustaining adoption strategies:
  - Continuous public education and awareness campaigns via mixed media.
  - Incentive programs: loyalty programs, cashback rewards, tax incentives, exclusive discounts.
  - Integration and interoperability with existing payment and government systems.
  - Grant legal tender status to ensure acceptance.
  - Offer adjacent payment features to create stickiness and increase PSP value-added services.
- Onboarding processes:
  - All respondents are conducting or planning merchant and individual onboarding, including KYC/AML, through intermediaries (typically PSPs).
  - Specific strategies:
    - User-friendly onboarding for online and brick-and-mortar businesses and streamlined digital channels for individuals.
    - Two jurisdictions plan tiered wallets with lower KYC requirements for financial inclusion purposes.

### Cost recovery and subsidies
- Investment cost responsibilities:
  - 41 percent of central banks anticipate splitting CBDC investment costs with participating PSPs.
  - 6 percent of central banks will bear all the investment costs.
  - The remainder are "Undecided".
- Ongoing cost allocation views:
  - More than 50 percent of central banks believe they are responsible for covering most development and implementation costs of the CBDC system and network.
  - PSPs are expected to cover costs related to integrating their systems with the CBDC platform and developing CBDC-enabled products.
- Subsidies for transition costs:
  - Central banks remain largely undecided on subsidizing system integration costs for PSPs and merchants.
  - A quarter of respondents stated they would not provide any subsidies.

### Education, awareness, and user research
- Research methods used by jurisdictions exploring CBDC:
  - Consultations based on white papers, public surveys, pilot testing, face-to-face engagements.
  - Research topics: consumer payment behaviors, retail CBDC benefits versus other instruments, public perception.
- Public awareness campaigns:
  - Launched/piloted jurisdictions have conducted campaigns with generally positive outcomes, including increased wallet activations.
  - Some pilots face limited public awareness due to limited scope.
  - Jurisdictions yet to launch recognize the importance of campaigns but have not decided on modalities.

### Sample KPIs for CBDC adoption (annex summary)
- General KPIs (stakeholder examples):
  - Central bank:
    - CBDC in circulation: Total value of CBDC in circulation.
    - Transaction volume: Total number of CBDC transactions over a specific period.
    - Transaction value: Total value of CBDC transactions over a specific period.
    - Average transaction size: Average value of CBDC transactions.
  - Intermediaries:
    - Intermediary participation: Number of intermediaries acting as CBDC wallet providers; number of banking/payment systems integrated with CBDC.
    - Intermediated transactions: Total number and value of CBDC transactions processed by intermediary types.
    - Intermediary satisfaction: Scores from surveys.
  - Users:
    - Registered individuals: Number registered for a CBDC wallet/account.
    - Registered merchants: Number registered for a CBDC wallet/account.
    - Active users: Number of wallets/accounts making more than [x] transactions over a specified period.
    - User satisfaction: Survey scores and feedback.
- KPIs for financial inclusion and access:
  - Intermediaries:
    - CBDC cash-in/cash-out points: Number of people living within [x] kilometers of a point.
    - Growth rate of intermediaries in rural vs. urban areas.
  - Users:
    - Consumer adoption rate in rural vs. urban areas.
    - Merchant adoption rate in rural vs. urban areas.
    - Usage rate among previously unbanked: Proportion who did not have a bank account but began using CBDC.
    - Increase in banked population: Growth in individuals with access to banking services post-CBDC.
    - Volume of microtransactions: Total number and value of transactions below a specified threshold.
    - Low-income households: Percentage opening and maintaining a CBDC account.
- KPIs for payment system efficiency and resilience:
  - Central bank:
    - Network availability and reliability: Total uptime/downtime over a specified period.
    - Transaction processing speed: Number of transactions processed per second.
    - Security incidents: Number and severity of security breaches/incidents.
  - Intermediaries:
    - Intermediary participation: Percentage of financial intermediaries adopting CBDC.
    - Improvement in transaction speed: Improvement in average consumer transaction completion time versus previous methods.
    - Transaction fees: CBDC transaction fees compared to traditional methods (i.e., CBDC fees for merchant vs average MDR).
    - Diversification of payment options: Number of payment methods merchants can offer with CBDC integration.

### Existing market structures relevant for CBDC ecosystem
- Overview of intermediary business models:
  - Traditional financial institutions (FIs: commercial banks, credit unions):
    - Offer deposits, loans, credit cards; revenue from loan interest, cross-selling, transaction fees; costs from branch networks, compliance, IT; commercial banks for-profit; credit unions not-for-profit.
  - Nonbank financial institutions:
    - Leverage consumer data to offer personalized digital products (payments, consumer finance, insurance).
  - Postal service operators:
    - Government-owned in some cases; revenue from delivery fees, financial service fees, government subsidies; may operate as non-profit or for-profit.
- Merchant-side intermediary structure:
  - Acquirers link merchants to card networks; sub-acquirers use acquirer infrastructure; ISOs promote services and supplementary offerings.
  - Acquirers bear significant fixed costs; sub-acquirers avoid fixed system establishment costs but face variable costs per merchant.
  - Acquirers incur variable interchange and network access fees payable to card issuers and networks.
  - Merchant primary cost for card-acquiring services is the Merchant Discount Rate (MDR), which includes interchange fees, scheme fees, and the acquirer’s net revenue.
- Market dynamics and competition:
  - Fintech and Big Tech entrants are transforming markets by leveraging advanced technology and personalized products.
  - These entrants pressure traditional FIs, which face legacy technology and regulatory constraints.
  - In EMDEs, fintech/Big Tech pose particular challenges as they reach consumers inaccessible to traditional banks.
  - Acquiring markets are often concentrated with a few dominant acquirers; sub-acquirers can improve access for small merchants by enabling multiple card networks.
  - Examples of Big Tech dominance in specific markets:
    - Alipay and TenPay in China dominating retail payment systems.
    - Google and PhonePe with significant shares in India’s third-party payment applications market.
    - Greater limitations of Big Tech involvement in the United States’ financial sector.
- Policy implication:
  - Central banks should consider competition and collaboration dynamics among traditional banks, fintechs, and Big Tech when designing CBDC ecosystems.

*Source: Annex 1. CBDC Adoption Questionnaire (ftnea2024005)*

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*Central Bank Digital Currency Adoption:  
Inclusive Strategies for Intermediaries and Users  
NOTE/2024/005*

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_Source: https://www.imf.org/-/media/files/publications/ftn063/2024/english/ftnea2024005.pdf_