Are We Making Progress with Financial Inclusion?
Yes. In 2011, 51% of adults globally had a bank or mobile money account with a financial institution. By 2021, 76% of adults had accounts. In emerging economies alone, an impressive 71% have accounts.
This ~50% global increase in account ownership is very much worth celebrating. It means we’re making solid progress on global financial inclusion goals. What this really means is that on average, 76% of adults have access to financial products and services (such as the ability to save, pay and receive payments, and access credit and insurance) that are useful and affordable.
But the toil towards 100% global ownership for 1.4 billion adults remains. This universal access is the goal of the UN’s Sustainable Development Goals come 2030. The dramatic financial inclusion gains over just the last couple of years shows us that this is possible.
But access is only half the battle. Admittedly, it’s the first step because you need that banking account first. But then you have to actually use it. The financial products/services that people can access have to actually meet their needs. And herein lies the biggest challenges to reaping the gains we imagine are possible with universal access.
As expected, usage is an emerging economies problem. Even though 71% of adults now have access, only 57% have made or received a digital payment via their account (though actually an impressive jump from 35% in 2014). Contrast this in developed economies where 95% of adults have done so, up from 88% in 2024. What’s more: About two-thirds of unbanked adults surveyed by the World Bank said they would need help using a bank or mobile money account if they opened one. A 2020 OECD survey revealed that only 17% of adults globally feel that their financial literacy level is high. Alarming. And only about half of the adults in emerging economies are able to access funds (though mainly through family and social networks) within 30 days to meet unexpected expenses e.g., medical bills.
Still, it is important to acknowledge the current progress we’ve made and understand how we can sustain it. Global trends have been critical facilitators, some of which are below:
The growth of digital technology. There has been a lot going on with digital innovation and technology. Plus the near ubiquity of telecommunications networks and mobile phones have meant that people increasingly live their lives online. This has meant a literal explosion of private sector players - notably Fintech, e-commerce, social media, marketing, big data and analytics companies and many others, using digital as their primary channel for products and services. Even large traditional banks, typically a conservative bunch, have gotten on the bandwagon.
Government’s commitments to reduce their shadow economies. You would be hard-pressed to find an emerging economy government that does not currently have a cashless economy agenda. These agendas are being pursued by countries such as Egypt, Nigeria, India, Uzbekistan, United Arab Emirates, China, South Korea, Canada, Singapore, the European Union, and many more. Their reasons have been multi-faceted - increasing transparency so that they can reduce black markets while optimizing tax collection, reducing costs of cash management, and even environmental concerns of printing cash, and just generally being a part of the global trend towards more digital processes in everyday life and work. What’s more, as governments focus more and more on this, traditional financial institutions feel increasing pressure to follow the pied piper.
The growth of mobile money. Sub-Saharan Africa (SSA) has seen a literal explosion in mobile money - out of the 55% who have accounts in SSA, 33% have a mobile money account. Compare this to the global average of 10% and you can see the magnitude of the impact that this non-traditional type of banking has had on Africa. What’s more, account holders actually use it - 75% of mobile money account owners have used it to receive and/or make payments.
COVID-19. Simply being unable to use cash for fear of diseases meant that people had to open accounts to transact, or to use their dormant accounts. Up to 80 million adults in India and 100 million in China paid a business/merchant digitally for the first time in their lives in 2020. Overall, 40% of adults in emerging economies made a digital transaction for the first time! The stricter the lockdown, the more digital payments were adopted. COVID-19 was a development that nobody saw coming. But in the midst of its dark clouds, increased financial inclusion emerged as an unlikely silver lining.
Overall, given the progress we’ve made, the message is clear - to continue using digital to double down on access. For a financial institution, this means that groups that typically do not have access to financial products and services - the 1.4 billion adults - should be a primary concern. How existing or new products can be redesigned/designed to facilitate easy access should be a key part of product development. Being able to understand and then meet the needs of these new segments is also key. It’s not easy to take a pause from the humdrum of work to think through these, but benefits around business growth and industry leadership should be good motivators.
What’s more, collaborations with governments are essential. Governments are absolutely concerned with the topic of financial inclusion, so identifying how and where partnerships make sense will likely raise interesting opportunities.
The next significant progress in financial inclusion will be borne by these - fearless private sector players, interesting government collaborations, and even deeper digital channels.
References: CGAP, Principal, The World Bank, GPFI