2/4  BIS central bankers' speeches  The second is being technologically adept. Across the globe, the “digital divide” remains a major roadblock in effective usage of financial services, especially in rural areas with poor connectivity. While awareness of digital financial services has gradually increased, actual usage among low income groups in Malaysia remains low. Among the key drivers to encourage greater adoption of digitally-enabled financial services is simplicity and user friendliness. A well-designed solution which provides positive user experience can reduce mindset and technological barriers to the adoption and usage of digital financial services. For financial services providers, digital solutions have the benefit of reducing operational costs that may allow for more affordable products and wider access to the highly connected (mobile phone and internet usage) Malaysian population. Islamic finance can accelerate digital innovation through value-adding partnerships with the fintech community. During the pandemic, consumers and businesses alike have increased their use of mobile and digital platforms. Malaysia has a wide take up of mobile banking technology representing nearly 60% penetration rate to the total adult population (as at July 2020). With increasing awareness of e-commerce amongst Malaysians, businesses have shifted their platforms or increased their presence on online market places and utilisation of e-payments. Several financial institutions have also even enhanced their internet and mobile banking channels to help market SME businesses amongst their customers. Takaful operators and insurance companies have also increased digitalisation of their operations such as claims processing and customer servive to minimise face-to-face interaction during the movement control order period.

However, the analysis is less urgent in other countries, where they have not experienced the same rapid decline in the use of cash. While the value of outstanding cash as a percentage of GDP is just over 1 per cent in Sweden, it is 10 per cent in the Eurozone and a good 20 per cent in Japan. Our Nordic neighbours are also conducting similar analyses because of a decline in the use of cash. Norway and Denmark, for instance, have produced reports and analyses on digital central bank money. The Bank of England and the Bank of Canada have published research articles in this field that analyse, for instance, possible motives for central bank digital currencies and their consequences for monetary policy and financial stability. 6 Central banks in some emerging market economies have also shown an interest in central bank digital currencies. These countries’ motives for being interested in central bank digital currency differ somewhat from our own. One motive is that they see the opportunity to broaden access to fundamental financial services to all parts of the population, that is to say, financial inclusion. Other arguments concern reducing the use of cash, which may be regarded as costly and risky. They also point to the negative environmental aspects of cash and to the fact that it enables money laundering and makes it easier for the black economy. 7 The work that is done is not solely theoretical.