Central banks play important roles in monetary policy, financial sector supervision, and payment systems. Central bank policies can play critical roles in whether the financial system advances financial inclusion. As technology continues to change the financial sector, however, there may be new ways in which these institutions undertake this work using financial technology ("fintech"). This also raises the question of whether central banks are well positioned to promote a more inclusive economy–or whether the role of the central bank should be revisited.
Simultaneously, the 2018 World Inequality Report finds that global income and wealth inequality is growing. In partnership with the Bill and Melinda Gates Foundation, this project explores the mandate and design of central banks to consider whether they might play an even stronger role in promoting financial inclusion, financial health, and a more inclusive economy. More broadly, it creates a vision for what the "central bank of the future" might look like and focuses in particular on how emerging technology could support central banks in their efforts to promote financial inclusion, growth, and development.
Dean Michael S. Barr Professor Adrienne A. Harris
Primary investigators Michael S. Barr, Dean of the Ford School, and Adrienne A. Harris, Towsley Foundation Policymaker in Residence, Ford School Professor of Practice and former Special Assistant to President Obama are leading a project to help develop the central bank of the future and its role in fostering financial inclusion around the world. This project will consider how the role of a central bank could evolve in the future to enable it to make greater contributions toward financial inclusion. The project will consider monetary policy, financial sector supervision, and payments systems, as well as other functions. The project also is meant to identify technologies, processes, or tools that could benefit a central bank in supporting public policy objectives related to inclusion, and consider how other sectors, including the private sector and philanthropy, might have a role to play in supporting the development of those tools.
Over the period of two years, we are engaging with standards-setting bodies, central banks, financial regulators and policymakers, as well as futurists and technologists, incumbent financial institutions, fintechs and other financial ecosystem stakeholders. One key output of this project will be a policy paper outlining potential future designs for a central bank and potential pathways for reaching that future state, along with a series of working papers focused on specific topics. As those papers are released, they will be published here. To be notified of their availability in real time, please join our email list, visit our LinkedIn page, or follow us on Twitter @MichiganCFLP.
Papers & Issue Briefs
Introductory Project Brief & Overview. Produced December 3, 2018. This paper was drafted at the inception of the Central Bank of the Future project as a brief memo and overview of ideas intended to provide the background supporting the project’s intent and importance.
Working Paper #1. The Central Bank of the Future. Released July 8, 2019. The goal of this paper is to provide an early research note, beginning to build a foundation for a series of forthcoming Central Bank of the Future (CBOTF) papers, so that readers embark on this journey with a basic understanding of the evolution of Central Bank involvement in financial inclusion. This paper acknowledges several contributions to the research on Central Bank involvement in financial inclusion but is not intended to be an exhaustive review of current work. Rather, this paper seeks to provide research summaries and a few case studies to provide a high-level overview of the nexus between Central Banks and financial inclusion.
Working Paper #2. The Central Bank of the Future. Released November 1, 2019. This paper distills the discussion of a private roundtable held at the University of Michigan's Gerald R. Ford School of Public Policy in June 2019. The goal of the roundtable was to consider new ideas that could better facilitate Central Bank innovation to support financial inclusion. Attendees participated in the conversation under Chatham House Rules; therefore, all ideas are listed without attribution.
Working Paper #3. Building the Payment System of the Future. Michael S. Barr, Adrienne A. Harris, Lev Menand, and Wenqi (Michael) Xu. Released July 31, 2020. This paper explores how central banks can design more inclusive payment systems. Payment systems are critical infrastructure that generate positive network externalities. The more people who use them, the better off everyone using them is. They allow households, businesses, governments, and nonprofits to clear and settle transactions. Consumers use payment systems when they swipe their credit or debit cards; homeowners use them when they write checks; and businesses use them when they wire money. Also available at SSRN: https://ssrn.com/abstract=3664790.
Working Paper #4. 2019 Conference Summary. Released March 20, 2020. This paper describes the proceedings of the 2019 Central Bank of the Future conference held at the University of Michigan on October 2-3, 2019. The summary also includes links to watch full videos of conference proceedings.
Working Paper #5. Central Banks as Utilities? Released January 29, 2021. This paper distills the discussion of a private roundtable held at the University of Michigan's Gerald R. Ford School of Public Policy in June 2020. The goal of the roundtable was to explore whether central banks could provide services in the following areas: real time payments, account provisioning for individuals, data collection or regulation, and identification systems. Attendees participated in the conversation under Chatham House Rules; therefore, all ideas are listed without attribution.
Working Paper #6. Central Banks, Climate Change, and Financial Inclusion. Released April 28, 2021. This paper distills the discussion of a private roundtable held in March 2021. The goal of the roundtable was to understand what central banks are doing to make their countries more resilient to the effects of climate change, how the effects of climate change impact the poor, and what central banks have learned about climate change and financial inclusion in the wake of the COVID-19 crisis. Attendees participated in the conversation under Chatham House Rules; therefore, all ideas are listed without attribution.
Working Paper #7. Should Central Banks use Distributed Ledger Technology and Digital Currencies to Advance Financial Inclusion? Michael S. Barr, Adrienne A. Harris, Lev Menand, and Karin Thrasher. Released May 17, 2021. This paper examines how central banks might use distributed ledger technology ("DLT") to improve access to safe and affordable financial products and services. We consider how central banks might use DLT to advance objectives such as Anti-Money Laundering ("AML") compliance and discuss both central bank digital currencies ("CBDC") and private digital currencies, and considers implementation challenges.
Working Paper #8. Central Bank of the Future Summary and Recommendations for Further Inquiry. Michael S. Barr, Adrienne A. Harris, Megan Kelly, Emma Macfarlane, and Bryan Ricketts. Released July 19, 2021. This paper summarizes many of the key takeaways from the two year Central Bank of the Future project and provides recommendations for further research in each of its five sections. Topics covered include payment systems, competing definitions of financial inclusion, changes brought on by fintech, and especially AI and DLT, global identification systems, and anti-money laundering.
New Data: 2020 Financial Inclusion Mandates Among Central Banks (Worldwide)
DOWNLOAD this open source dataset created by the University of Michigan Center on Finance, Law & Policy. Designed to contribute to an international perspective, this original dataset identifies which central banks around the world have made financial inclusion part of the bank's mandate. Contains citations, full text of mandates, and links to publicly-available sources.
What If...? (Blog Series)
What will the Central Bank of 2070 look like? Released June 4, 2020. A series of guest bloggers chime in.
To read other articles on financial inclusion, economic inclusion, fintech, regtech, and related topics, visit our LinkedIn page or follow us on Twitter @MichiganCFLP.