Technology’s impact on financial inclusion is not what you think

Since the first iteration of the Global Findex survey in 2011, the share of adults in developing economies with a financial account has risen to 71%—an increase of more than 50 percentage points. While this growth is worth celebrating, the aggregate numbers hide significant differences in how and why adults in developing economies access and use financial services today.

From 2011 to 2017, financial inclusion efforts were driven by “scale,” as governments in large-population economies such as India and China introduced policies to specifically increase access to accounts. Between 2017 and 2021, however, global trends shifted to broader “scope”, such that 34 developing economies of various sizes increased their share of adults with a financial account by more than 10 percentage points. Both scale and scope expansion of financial inclusion has been made possible by customer-facing digital technology – but the kind of technology that makes an impact and how it delivers results may not be what you think.

A great deal of focus and excitement has pointed to the digital-only services offered by non-bank financial entities such as mobile money providers or other financial technology firms (fintechs). Mobile money is a financial service offered by a telecommunications or a fintech firm that works 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 typically 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 outside the home. These actors are central to the economies of sub-Saharan Africa, as well as in places like Bangladesh and Paraguay. But contrary to the amount of attention they get, they are not the only source driving growth in digital inclusion. They are not even the biggest source.

The Global Findex captures the demand-side perspective on digitization of financial services in two ways. First, we ask adults about the accounts people have (whether they’re with a traditional financial institution like a bank, or, as we’ve been asking since 2014, with a mobile money provider). Then we ask about the services and transactions that respondents use, to distinguish cash-based transactions from those carried out through a computer, mobile device or card-based payment network without cash changing hands. That holistic view allows us to highlight the relative impact of digital accounts as well as digital transactionssuch as direct digital payments.

Mobile money accounts play a critical role in sub-Saharan Africa and other countries

Ten percent of adults worldwide had a mobile money account in 2021, compared to 4% in 2017. This rises to 13% of adults if we only look at mobile money account ownership in developing economies. A minority of those mobile money account holders (about 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 on a global scale.

Mobile money provides a critical service in some economies. Sub-Saharan Africa is the global leader in mobile money accounts regionally, with 33% of adults in the region having one—just six percentage points less than the 39% of adults in the region with an account at a bank or similar financial institution . Mobile money adoption has grown 13 percentage points since 2017, a rate that mirrors the 13 percentage point growth in regional ownership of any type of financial account. In certain economies, such as in Benin, Cameroon, Ghana and Malawi, adults even appear to be replacing their financial institution accounts with mobile money accounts: the share of adults with accounts of any kind increased in these economies between 2017 and 2021. percentage share represented by traditional brick and mortar accounts has declined.

Outside of sub-Saharan Africa, a few developing economies also have around 30% or more ownership of mobile money accounts. These 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 with a bank or similar institution (the data do not allow us to determine how adults with both types of accounts fare differently not used).

So, if mobile money has had a relatively small overall impact on financial access in developing economies, where does technology play a bigger role? With payments.

Globally, payments are the most used financial service

Figure 1: Adults using a financial services account in developing economies (%), 2021

Thirty-nine percent of adults in developing economies opened their first financial account with a bank or similar financial institution (excluding mobile money accounts) with the express purpose of receiving a direct government payment (such as a wage, pension or benefits payment ) or a direct wage payment from a private sector employer. In the populous economies of China and India – whose governments launched programs to drive financial inclusion between 2014 and 2017 – the share 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 in their account in the 12 months prior to the Global Findex 2021 survey. Among them, 54% reported receiving a wage payment directly into their account, while 36% received a government support payment. Additionally, 42% received a domestic transfer in their account, a better option than cash and money transfer operators because recipients can leave money in the account for safekeeping or for 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 to rural areas.

Receipt a direct payment is only part of the story. Another important part is making digital payments directly from an account with a card or phone. While previous iterations of the Global Findex found that payees tended to simply cash out when they wanted access to their money, the 2021 survey finds that 83% of account-owning payees now also make direct payments. Many of these payment products are offered through bank-fintech partnerships.

Together, these findings point to payments digitization in developing economies as an important technological mediator of both financial access and use. The benefits flow both ways: recipients get a safer and more convenient way to store and save their money, reduce transaction costs and build a financial history, and payers benefit from an end-to-end digital payment route have what cost and leakage.

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 save, store and borrow money (%), 2021

Direct digital payments – whether through a traditional bank or a fintech – require a robust payment infrastructure

An overall message from the data is that payments sent directly into accounts are a driving force for expanding financial inclusion in developing economies.

But the successful digitization of payments requires an enabling 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 regulations for data privacy and consumer protection. These are the key enablers that banks and fintechs will rely on to expand their reach to increase financial access and use in developing economies.