Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.

Being able to have access to a transaction account is a first step toward broader financial inclusion since a transaction account allows people to store money, and send and receive payments. A transaction account serves as a gateway to other financial services, which is why ensuring that people worldwide can have access to a transaction account continues to be an area of  focus for the World Bank Group (WBG). Most notably, it was the focus of the World Bank Group’s Universal Financial Access 2020 initiative, which concluded at the end of 2020. Though many gains were made through this initiative, it is an indicator of the scale of the challenge that still more work remains to be done.

Financial access facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies. As accountholders, people are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk, and weather financial shocks, which can improve the overall quality of their lives.

The ongoing COVID-19 crisis has also reinforced the need for increased digital financial inclusion. Digital financial inclusion involves the deployment of the cost-saving digital means to reach currently financially excluded and underserved populations with a range of formal financial services suited to their needs that are responsibly delivered at a cost affordable to customers and sustainable for providers.

Great strides have been made toward financial inclusion and 1.2 billion adults worldwide have gotten access to an account between 2011 and 2017. As of 2017, 69% of the world’s adults had an account. Digital financial services — including those involving the use of mobile phones — have now been launched in more than 80 countries, with some reaching significant scale. As a result, millions of formerly excluded and underserved poor customers are moving from exclusively cash-based transactions to formal financial services using a mobile phone or other digital technology to access these services.

Moving from access to usage of accounts is the next step for countries where 80% or more of the population have accounts (China, Kenya, India, Thailand). These countries relied on reforms, private sector innovation, and a push to open low-cost accounts, including mobile and digitally-enabled payments.

However, close to one-third of adults – 1.7 billion – were still unbanked in 2017, according to the latest Findex data (2021 data forthcoming).About half of unbanked people included women poor households in rural areas or out of the workforce.

Between 2011 and 2017 gender gap in account ownership remained stuck at 9 percentage points in developing countries, hindering women from being able to effectively control their financial lives. Countries with high mobile money account ownership had less gender inequality. The impact of the COVID-19 on this gender gap remains to be seen.

Since 2010, more than 55 countries have made commitments to financial inclusion, and more than 60 have either launched or are developing a national strategy. Countries that have achieved the most progress toward financial inclusion have:

  • Policies delivered at scale, such as universal digital ID – India and Aadhaar / JDY accounts – more than 1.2 billion residents covered
  • Leveraged government payments. (For example, 35% of adults in low income countries receiving a government payment opened their first financial account for this purpose.)
  • Allowed mobile financial services to thrive. (For example, in Sub-Saharan Africa, mobile money account ownership rose from 12% to 21%.)
  • Welcomed new business models, such as leveraging e-commerce data for financial inclusion
  • Taking a strategic approach by developing a national financial inclusion strategy (NFIS) which bring together diverse stakeholders including financial regulators, telecommunications, competition and education ministries
  • Paying attention to consumer protection and financial capability to promote responsible, sustainable financial services

When countries take a strategic approach and develop national financial inclusion strategies which bring together financial regulators, telecommunications, competition and education ministries, our research indicates that when countries institute a national financial inclusion strategy, they increase the pace and impact of reforms.