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Digital Financial Inclusion: Why It Matters and What’s Driving Change

Financial inclusion is a major global challenge that can be difficult to define. However, most commentators agree that it begins with access to mainstream financial products. Jim Yong Kim, President of World Bank Group suggests, “Universal access to financial services is within reach – thanks to new technologies and transformative business models”. As the world accelerates digital adoption, this blog considers some drivers and inhibitors of financial inclusion.

In the U.S. an estimated 14 million adults are unbanked, and a similar number underbanked. Likewise, more than one million adults in the U.K. are unbanked. Virtually no country has 100% financial inclusion.[1]

Most “banked” consumers enjoy the convenience, certainty and security of digital banking and payments. Over 64% of American adults now use online banking; the volume of digital payments grew by 20% in first half of 2020 alone. While this is good news for banks and their customers, it also widens the divide between the banked and the unbanked.[2]

Why Financial Inclusion Matters

Financial inclusion is both a challenge to be confronted and an opportunity to be grasped. There’s no “one-size-fits-all” solution to solving the problems of underbanked populations around the world, but more affordable and accessible digital access to financial services could go a long way.

The case for financial inclusion is indisputable: Everyone benefits from being incorporated into the mainstream economy. As customers gain access to more reliable financial services and advice, they are better positioned to grow financially, and empower themselves and their communities. Banks likewise benefit from new customer segments they can cultivate over the long-term. The overall economy is more likely to flourish, as more people are able to gain access to the financial system and begin to build wealth.

The Digital Divide

Often, people who face barriers to mainstream financial services are also digitally excluded. Cash may be all they have access to, and thus they become further marginalized in the digital economy as the prevalence and use of cash continues to decline. The COVID-19 pandemic greatly accelerated decline of cash usage, with statistics showing that the global percentage of cash volume used at point-of-sale (POS) plunged from 52.6% in 2019 to 20.5% in 2020.[3]

So what does this mean?

Today, digital inclusion is a prerequisite for financial inclusion. Those who are not connected are denied access to many services and invariably pay more for basic services and utilities. Financial exclusion affects a wide range of people of all ages. Those on low incomes are the most vulnerable. Age, education and background are just some of the factors that influence financial exclusion.

Digital Inclusion – A Foundation for Financial Inclusion

Although digital exclusion is a major global problem, technology can also be an enabler to better solutions and better outcomes. With the right technology and business strategy, banks can promote financial inclusion by:

Reducing barriers to entry with lower cost digital services. Compared to traditional banking, digital banking services are cheaper to manufacture, distribute and support. These savings can make banking services more cost-effective and affordable to those who need them most. Rethinking balance requirements and fee structures will also go a long way to making banking more accessible to a broader population.

Removing biases. Systemic biases have contributed to the issues we’ve faced with financial inclusion for years, but these can be eradicated. Artificial intelligence (AI) – with proper scrutiny and oversight – offers a powerful tool that can be leveraged to remove biases from processes, systems, and decisions.

Providing bespoke services that are easy to access and easy to use. With digital technology, banks can offer services that mimic cash, for example with real-time balances, immutable payments and intuitive budgeting tools. Banks can educate and encourage people to show them that it is actually easier and more convenient to use digital payments than physical cash.

Fighting cybercrime and reducing the risk of theft or loss. Digital services offer a safe and secure alternative to holding cash, particularly for businesses that primarily engage with cash transactions. However, there are bad actors out there and banks must be supremely vigilant in ensuring security in the digital age. In addition to internal security measures, teach your customers about the warning signs and risks of identity theft and cybercrime. Everyone needs complete confidence in digital financial services – one bad experience will undermine trust, but robust security and informed consumers form the blueprint for building trust and loyalty. 

Harnessing the power of data. Leverage data to help educate and advise customers, particularly those with limited experience in financial management. Help customers of any income be advised of the affordability of purchases before they are made, and encourage customers to save with goals, rewards and incentives. Data-driven insights can enable every customer to see their true overall financial position to understand exactly what they can afford and when.

Open Banking and New Payments Models

Evolving business models, regulatory policies, open banking, and new payment methods also have implications for financial inclusion. Such initiatives expand the breadth and depth of financial services in ways that support financial inclusion. For example, innovative ways of performing credit assessments can help people with thin (or “invisible”) credit histories gain access to credit which previously was unattainable.  

With access to a holistic view of their financial position, people can make better informed decisions based on data and real-life events. Increased data sharing, which is made possible with open banking, will also help people manage their money more easily. Open banking is ultimately about improving the customer experience. By offering smoother customer journeys banks can help drive financial inclusion.

Financial inclusion is more of a journey than a destination. A great deal of progress has been made already, but there is much more to do. Innovation and digital technology will play a crucial role in adapting financial services to meet the needs of all.







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Andrew Beatty

Andrew Beatty

Head of Wealth, Retirement & International


Member since

17 Sep 2018



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This post is from a series of posts in the group:

Financial Inclusion

The financial services industry has much to contribute to the UN and World Bank goal of full financial inclusion by 2020. This group will focus on industry contributions, ideas, barriers and enablers.

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