The Covid-19 pandemic put a damper on a lot of progress over the last three years, but for financial inclusion it was a catalyst that drove a large increase in digital payments amid the global expansion of formal financial services, the World Bank announced.
The bank said that developing countries today, 71 per cent of people have an account, up from 42 per cent a decade ago. Globally, 76 per cent of adults around the world have an account today, up from 51 per cent a decade ago.
In the Global Index 2021 database, the World Bank explained that the expansion created new economic opportunities, narrowing the gender gap in account ownership, and building households’ resilience to better manage financial shocks.
The bank said that in developing economies, 36 per cent of adults received a payment into an account, such as private or public sector wage payments, government transfer or pension payments, payments for the sale of agricultural products or domestic remittances.
Of those 36 per cent who received a payment into an account, 83 per cent also make a digital payment, about two thirds use the account to store money for cash management, and about 40 per cent tell us they use their account to save or to borrow money.
Financial inclusion matters and is the cornerstone of development. When people have a financial account, it enables them to take advantage of other financial services like saving, making payments, accessing credit.
“Findex is showing us that digitalisation of financial services is changing the game,” it said.
The bank said that these tremendous gains are also now more evenly distributed and come from a greater number of countries than ever before.
The biggest growth has been in the use of digital payments, which surged during COVID-19 mobility restrictions and when cash was perceived as unsanitary.
It said that two-thirds of adults worldwide now make or receive a digital payment. In developing countries, excluding China where digital payments are widespread, some 40 per cent of people who made a digital payment from their account (to a merchant or for a utility service) did so for the very first time since the start of the pandemic.
“Digital payments are typically safer and more convenient, and can be an entry to using other financial services. Findex data show that adults who receive a payment into an account in developing economies make use of financial services more than the average adult,” the bank said.
“The COVID-19 pandemic has highlighted the fundamental role that digital infrastructure can play in rapidly delivering services and social assistance to people. Integration of digital ID, digital payments, and trusted data sharing platforms is critical for serving the poor at scale and connecting communities to opportunities,” Global Director for Digital Development Global Practice, Christine Zhenwei Qiang said.
“This report underscores that for many developing country consumers, the gateway to innovative financial services is mobile money, supported by improvements in coverage, affordability and reliability of digital infrastructure.”
The gender gap in account ownership has also shrunk, narrowing from nine to six percentage points in developing countries. The data now find that 74 per cent of men but only 68 per cent of women in developing economies had an account.
The banks said that globally, some 1.4 billion adults remain unbanked. These people are hardest to reach – and more commonly women, poorer, less educated, and living in rural areas.
While digitalizing government and other payments is the way to go, much more is needed. Governments, private employers and financial service providers, including fintechs, should work together to lower barriers to access and improving physical, data and financial infrastructure.
“To reach them, governments and the private sector will need to work hand-in-hand to forge the policies and practices needed to build trust in financial service providers, confidence in using financial products, new tailored product designs, as well as a strong and enforceable consumer protection framework,” Lead Economist in Development Economics Vice Presidency and main author of the Global Findex report, Leora Klapper said.
Also, despite this continued growth in account ownership, only about half of adults in developing economies report that they could reliably access extra funds within 30 days if faced with an unexpected expense, according to the Findex findings. And about two-thirds of adults are very worried about at least one area of financial stress, whether it’s paying for medical bills, paying for school fees, paying for regular monthly bills, having enough money for old age.
“Findex is showing us that digitalization of financial services is changing the game, which is very inspiring for those financially included – and for Bank staff working on these issues,” Global Director for Finance in the Finance, Competitiveness & Innovation (FCI) Global Practice, Jean Pesme said.
