This has been a demanding challenge. At the start of our engagement on financial access back in 2013, we said that having a real target with an end date would keep us focused and give us a benchmark against which we could measure progress.
In April we learned that we have made strong and consistent progress—a real cause for celebration. According to the Global Findex database, more than half a billion people gained a financial transaction account over the last three years, thanks to a combination of technology, private investment, policy reforms, and support from the global community.
Its insights are central to the World Bank Group’s Universal Financial Access 2020 initiative, a global commitment to ensure that all adults have access to an account by 2020. Since we announced the initiative in 2013, the World Bank Group has added more than 30 partners across the financial sector to help reach this important goal.
From access to use
But access isn’t enough. What matters is whether and how people use financial services.
The story that emerges from the latest Findex is one of digital technology’s impact on both access and usage.
To have and have-not
Despite overall progress, the gaps between haves and have-nots remain as wide as they were when we began to measure in 2011. Sixty-five percent of women now have an account, up from 58 percent in 2014, but the gap between women and men remains a persistent 9 percentage points in developing countries. In Pakistan, a man is five times more likely to open an account than a woman.
To close these gaps, we need to understand what women need and want from financial services. We understand that they prioritize privacy, low cost, and security; but we need to do a better job of recognizing how women’s and men’s financial goals differ and identify products and approaches that can help eliminate the gender gap.
This customer-centric perspective brings us again to the challenge of usage. Currently, one in five accounts is dormant, with neither a deposit nor a withdrawal in the past 12 months. Inactive account rates vary across regions but are especially high in South Asia. Understanding the pain points of women, the poor, farmers, and other excluded people will be critical for designing both new services and new regulations.
Digitizing government payments, for example, could improve financial inclusion among women by up to 20 percentage points in the Philippines and 28 points in Chile. Doing the same with agricultural payments could reduce the number of unbanked by up to a quarter in Mozambique, Nigeria, and Vietnam. And digitizing wages could bring in about 230 million unbanked people who are paid in cash.
Remittances are another promising arena: roughly 280 million account owners in developing economies still use cash or over-the-counter services to send or receive remittances, including 10 million people in Bangladesh and 65 million in India.
Innovation in the lead
Other interventions involve improving infrastructure—for example issuing digital IDs. When people can prove who they are digitally, financial institutions are much more likely to let them open an account.
We are also looking to the future to see the impact of blockchain, artificial intelligence, and other fintech innovations that have the potential to reconfigure the entire value chain for financial services.
But we need to strike a balance between unleashing fintech innovations, managing risk and stability, and protecting consumers—especially the poor. Some countries are grappling with this in interesting ways. Malaysia and Kenya are setting up regulatory sandboxes, which allow regulators to observe innovations in a controlled live environment to better understand potential risks and opportunities. Mexico and the Philippines are experimenting with RegTech—applying technology to simplify the cost and time for regulatory compliance and oversight.
These approaches bring together financial regulators, telecommunications and competition authorities, social welfare and education ministries, and the private sector to coordinate and accelerate financial inclusion efforts.
Millions of people have gained the chance to improve their lives. We must continue to work together – governments, development organizations, civil society, and the private sector – to make sure that number continues to grow.