Good news has been difficult to find lately in the global economy, yet there’s reason for optimism in a major area of social and economic development: strong progress has been steadily occurring in financial inclusion, as measured by increased access to financial services for the world’s poor. The new edition of the Global Findex – the pre-eminent worldwide measurement of financial inclusion — has been published by the World Bank Group and documents a decade of progress.
A great deal has changed since the last Global Findex indicators were collected in 2017. The average rate of account ownership in developing economies increased by 8 percentage points, from 63% to 71%. Remarkably, this growth has been widespread across dozens of developing economies, in stark contrast to the previous trend between 2011 to 2017, when most of the newly banked adults lived in just two countries: China and India.
The Global Findex 2021 contains a deep array of insights on global account ownership, usage, and financial resilience. Two trends seen in the data are particularly worth exploring given the impact they have already had and the ways they point to opportunities for the future. They are the growth in digital payments that took place in the context of the COVID-19 pandemic, and the relationship between digital payment adoption and use of other financial services.
Within months of the World Health Organization declaring a global pandemic, leading businesses and multi-lateral institutions began documenting the ways in which pandemic restrictions were accelerating the digitalization trend that began in the late-1990s. As early as May 2020, the global management consulting company McKinsey was declaring that “the COVID-19 recovery will be digital.” A more accurate statement would be that the pandemic itself has been digital, in the sense that internet and mobile usage has risen in parallel with the rise in infection rates.
This. The prolonged pandemic-related lockdowns prompted millions of men and women to change how they paid for groceries or paid a utility bill from in-person, cash-based payments—which in the pandemic context were viewed as unsafe and unsanitary—to digital payments made directly from an account (whether making a direct transfer, using a credit or debit card, or paying with a mobile money account).
For example, the share of adults in developing economies paying utility bills directly from an account was 18% in 2021 (figure 2.1.12)—but more than a third of those did so for the first time after the start of COVID-19. A similar increase is evident in the use of digital merchant payments. Excluding China (where high digital adoption and widespread use of mobile payment apps such as Alipay and WeChat Pay by over 80% of adults creates a misleading average) the share of adults in developing economies making digital merchant payments is 20%, 40% of whom (or 8% of adults) made their first digital merchant payment after COVID-19 started.
Digital acceleration takes different forms in different regions, and even in different countries. In Sub-Saharan Africa, the most popular digital financial services are mobile money accounts, which 33% of adults use to send payments. In Latin America and the Caribbean, where digital payments particularly exploded during COVID-19, account holders were more likely to use a variety of methods including debit and credit cards as well as the Internet or mobile phones.
, which in turn can open up additional economic opportunities. These include harnessing income-generating activities, accessing new markets, joining platforms, or simply benefiting from important information (such as news of market-price fluctuations) for their farming or business activities.
The Global Findex 2021 finds that almost two-thirds of adults in developing economies who received digital payments also used their account to store money for cash management, about 40% used their account to save, and 40% used their account to borrow. Although the data cannot establish a causal relationship, these findings suggest that digital inflows can pave the way for the wider use of financial services. We are seeing this especially in countries where regulations allow greater interoperability between banks and mobile-money providers, or where regulations provide flexibility for mobile-money providers to responsibly offer additional services. These are welcomed developments as access to a transaction account is an important start but is not enough to fully empower poor people to navigate their everyday financial and social needs. That also requires access to such financial services as savings, credit, and insurance.
Despite the growth in adoption of digital payments catalyzed by the pandemic, hundreds of millions of adults still receive payments in cash — for wages, government transfers, the sale of agricultural goods. Shifting such cash payments to financial-institution or mobile-money accounts is a proven way to increase financial inclusion among the unbanked: the Global Findex finds that 39% of adults in developing economies — or more than half of financial institution (excluding mobile money) account owners — opened their first account (excluding mobile money) at a financial institution specifically to receive a wage payment or emergency assistance payment from the government.
: 1.6 billion banked adults in developing economies still choose to make merchant payments only in cash.
Efforts to leverage these opportunities must also be implemented with an eye on closing the gaps that still remain in account ownership for women, the poor, the young, and those outside the workforce, all of whom continue to have lower account-ownership rates than men, wealthier households, older adults, and wage-earners. Fragile and lower-income countries likewise lag behind more stable and higher-income ones.
Addressing these gaps in financial inclusion has the potential to have positive impact in the form of reduced poverty, increased consumption, and increased spending on education, health, and income-generating opportunities. It would also contribute to greater resilience and financial well-being for the poor.
As we continue to analyze the rich new Findex data, we encourage others in the financial-inclusion community to distill the highest priorities for effective action — and to recognize the need for even stronger public-private partnerships. Our challenge now is to leverage the strong momentum of the past several years to maximize the benefits that financial inclusion brings to the poor, while redoubling our effort to ensure that financial services become accessible to, are used by, and provide benefits for those who remain unbanked.