The impact of technology on financial inclusion is not what you think
Since the first iteration of global findex 2011 survey, the proportion of adults in developing economies with a financial account has risen to 71%, an increase of more than 50 percentage points. While that growth is worth celebrating, the aggregate numbers mask significant differences in how and why today’s adults in developing economies access and use financial services.
From 2011 to 2017, financial inclusion efforts were driven by “scale,” as governments in large population economies like India and China enacted policies specifically to increase account access. However, between 2017 and 2021, global trends shifted towards a broader “reach”, with 34 developing economies of different sizes increasing their proportion of adults with a financial account by more than 10 percentage points. Expanding the scale and reach of financial inclusion has been made possible by customer-facing digital technology, but the kind of technology that makes an impact and the way it delivers results may not be what you think.
A great deal of attention and excitement has been focused on purely digital services offered by non-bank financial institutions, such as mobile money providers or other financial technology (fintech) companies. mobile money is a financial service offered by a telecommunications or fintech company that partners with mobile network operators, independent of the traditional banking network (this is different from traditional banking services accessed through a mobile phone). Mobile money services are often enhanced by local mobile agents, where customers can conveniently deposit even small amounts of cash to make payments, pay bills, send remittances, or store money away from home. These players are of central importance in the economies of sub-Saharan Africa, as well as in places like Bangladesh and Paraguay. However, contrary to the amount of attention they receive, they are not the only source driving the growth of digital inclusion. They are not even the biggest source.
The Global Findex captures the demand-side perspective on the digitization of financial services in two ways. First, we ask adults about the accounts people have (whether they are at a traditional financial institution like a bank or, as we have asked since 2014, with a mobile money provider). We then ask about the services and transactions respondents use, distinguishing cash transactions from those executed through a computer, mobile device, or card payment network without cash changing hands. That holistic view allows us to highlight the relative impact of digital accounts, as well as digital accounts. proceedingssuch as direct digital payments.
Mobile money accounts play a critical role in sub-Saharan Africa and other countries
Ten percent of adults globally had a mobile money account in 2021, up from 4% in 2017. That rises to 13% of adults when we look at mobile money account ownership in developing economies alone . A minority of those mobile money account holders (around one in four) only have a mobile money account. The remainder have accounts with both a mobile money provider and a bank or similar financial institution, suggesting that the marginal impact of mobile money on access to financial services, while significant in certain economies, is minimal at scale. world.
Mobile money provides a critical service in some economies. Regionally, Sub-Saharan Africa is the world leader in mobile money accounts, with 33% of adults in the region having one, just six percentage points less than the 39% of adults in the region having an account in a bank or similar financial institution. . Mobile money adoption grew 13 percentage points since 2017, a rate that reflects the 13 percentage point growth in regional ownership of any type of financial account. In certain economies, such as Benin, Cameroon, Ghana and Malawi, adults even appear to be replacing their financial institution accounts with mobile money accounts: the proportion of adults with accounts of any type increased in these economies between 2017 and 2021 as that the percentage of participation represented by traditional brick and mortar accounts decreased.
Outside of sub-Saharan Africa, some developing economies also have around 30% or more ownership of mobile money accounts. They include Argentina, Bangladesh, Brazil, Malaysia, Mongolia, Myanmar, Paraguay, the Russian Federation, Thailand, and Venezuela. But on average, less than 5% of adults in these countries have a mobile money account without also having an account at a bank or similar institution (the data does not allow us to determine how adults with both types of accounts use them differentially). ).
So if mobile money has had a relatively small overall impact on financial access in developing economies, where is technology playing a bigger role? With payments.
Globally, payments are the most widely used financial service
Figure 1: Adults using an account for financial services in developing economies (%), 2021
Thirty-nine percent of adults in developing economies opened their first financial account at a bank or similar financial institution (excluding mobile money accounts) for the express purpose of receiving a direct payment from the government (such as a salary, pension, etc.). or benefit payment) or a direct salary payment from a private sector employer. In the populous economies of China and India, whose governments launched programs between 2014 and 2017 to boost financial inclusion, the proportion of first account opening to receive a direct payment is well above average, at 49% and 54%. respectively.
Additionally, 36% of adults in developing economies received at least one payment into their account in the 12 months prior to the Global Findex 2021 survey. Among them, 54% reported receiving a salary payment directly into their account , while 36% received a support payment from the government. Additionally, 42% received a domestic remittance payment in their account, a better option than cash and money transfer operators because recipients can leave money in the account for safekeeping or savings. Digital payments made directly from a mobile phone are also often a cheaper and more convenient option for the urban poor to send money home in rural areas.
Reception a direct payment is only part of the story. Another key part is making digital payments directly from an account using a card or phone. While previous iterations of Global Findex found that payment recipients tended to simply collect when they wanted to access their money, the 2021 survey finds that 83% of account payment recipients now also make payments directly. Many of these payment products are offered by partnerships between banks and financial technology.
Together, these findings point to the digitization of payments in developing economies as a major technological enabler of both financial access and use. The benefits flow both ways: recipients get a safer and more convenient way to store and save money your money, reduce transaction costsand build a financial historyand payers benefit from having diminishing end-to-end digital payment tracking costs Y drain.
Figure 2: In developing economies, adults who receive a payment in an account are more likely than the general population to also make digital payments and to save, store and borrow money (%), 2021
Direct digital payments, whether by a traditional bank or a fintech, require a robust payments infrastructure
A general message from the data is that payments sent directly to accounts are a driving force for expanding financial inclusion in developing economies.
But the successful digitization of payments requires a financial infrastructure that facilitates direct deposits and digital payments by all financial providers. This infrastructure includes interoperable payment networks, telecommunications infrastructure, and network security. It also includes data privacy and consumer protection regulations. These are the key enablers that banks and fintechs will depend on to expand their reach and increase financial access and use in developing economies.