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Digitize Financial Services to Improve Financial Inclusion

by internationalbanker

By Francesco Di Salvo, Senior Financial Sector Specialist, World Bank





Financial inclusion is a crucial driver of economic development, enabling individuals and businesses to access financial services and improve their overall well-being. In 2021, 76 percent of adults globally and 71 percent of adults in developing economies owned an account, up from 51 percent of adults in 2011. Yet, despite significant progress over the last few years, around 1.4 billion are unserved.

A few questions inherently arise. Is the global financial-inclusion process fast enough? What business case can financial institutions make to trigger a race towards this large, untapped market of new clients? For financial-sector professionals, the answer to the first question is most likely a clear NO. As for the second question, this article invites readers to form an answer for themselves, presenting data related to financial inclusion and poverty, financial institutions’ enablers when working in a market, considerations regarding the potential value of unbanked customers and technology’s role.

Financial inclusion and poverty

People can be considered financially included when they have an account serviced by a bank or regulated institution, such as a credit union, microfinance institution or mobile-money service provider. However, financial inclusion means more than having an account. An account is only the first step towards accessing useful and affordable financial products and services (transactions, payments, savings, credit and insurance).

Research has shown that financial services can support people and businesses when they are thriving or when absorbing and recovering from economic shocks—such as climate disasters, unexpected expenses or job losses—by harnessing economic possibilities and creating resilience. Building resilience is the first step to ensuring economic agency and personal freedom. This is a complex task for around 712 million people who live on less than $2.15 per day, the extreme poverty-line threshold (see Table 1). A survey reported that only about half of adults in developing economies can access extra funds within 30 days if faced with an unexpected expense.

Source: PIP | Note: Regional poverty estimates are reported if survey coverage is above 50 percent within a three-year window of the reference year, with a break in 2020. The global estimate is reported if survey coverage is above 50 percent and coverage for low- and lower-middle-income countries is above 50 percent. For 2022, the latter is 63.9 percent.

Financial inclusion and poverty are strongly intertwined. Sixty-two percent of the unbanked interviewed in the World Bank’s Global Findex Database 2021 cited “lack of money” as one of multiple responses for why they did not have an account. In other words, people typically replied that they did not have enough money but also included another barrier, such as financial services being too expensive or too far away. These answers suggest that people would open an account if service costs were lower or the access points were more conveniently located. Only 12 percent of adults reported insufficient money as their only barrier. Fewer than 4 percent of unbanked adults reported all other barriers as the only reason.

Financial-inclusion enablers, technology innovation and policy

As presented within the “Payment Aspects of Financial Inclusion” framework, several preconditions should be in place for financial inclusion to succeed. A robust identification system is essential for financial institutions to perform customer due diligence, acquiring and verifying customers’ identities. Widespread access to mobile phones and internet connectivity enables digital financial services. Furthermore, customers must possess a certain level of financial literacy to make informed decisions, and a network of physical and digital touchpoints is necessary to access financial services. Products offered by financial institutions should fit and match clients’ needs. In addition, financial-market infrastructures should be in place to connect service providers, allowing the swift provision of transactional services.

Over the last two decades, emerging technologies have significantly transformed the financial sector’s landscape, fragmenting financial services into finer digital components offered by novel entrants. Large-scale retail entities, telecommunications providers, electronic currency issuers, predominant technologies and social-media firms are venturing into the financial realm. They leverage extensive datasets acquired from online transactions, messaging interactions and social-media activity to introduce innovative financial offerings.

Policymakers should adopt a forward-thinking strategy as the financial-services domain evolves to be more modular, automated, disaggregated and international. Effective financial inclusion requires policy and regulatory frameworks that, while ensuring stability, can accommodate swift technological advancements. Consumers must perceive the system as equitable, robust and able to safeguard their interests. Similarly, enterprises require a transparent regulatory environment that balances innovation with stability and promotes a healthy equilibrium between competition and collaboration. Finally, public policies can and should sustain account usage. For example, the promotion of digital payments, such as wages or government transfers, catalyzes the use of other financial services, such as storing, saving and borrowing money.

Digitization, the efficiency lever for the supply side

As a global trend, digitalization has revolutionized financial services by reducing customer acquisition and management costs, increasing customer value and enhancing financial-literacy channels’ effectiveness. Digital marketing and onboarding have made it more cost-effective to acquire new customers, while data-driven marketing and personalized services have increased the value of existing customers. Digital education and awareness campaigns have improved financial literacy and online platforms. Mobile and internet banking have allowed the financial industry to reduce the operational costs associated with maintaining networks of physical access points. In developed countries, financial institutions use a mix of high (e.g., chatbots and artificial intelligence [AI]-powered analytics) and low (e.g., internet banking portals and automated teller machines) technologies to serve clients.

Financial institutions seek a positive balance between the costs of acquiring and servicing new customers and the value these customers bring. The trade-off between customer acquisition costs and customer value is a critical consideration for these institutions, especially to enable short-term strategies. While marketing, onboarding and account-maintenance costs can be high, especially when targeting marginalized populations living in rural areas, the potential revenues generated by these customers through transactions, savings and credit can be substantial in the long term, yet they are often unclear during the onboarding phase. When onboarding costs outweigh short-term value estimates, financial institutions may be deterred from expanding their customer bases, limiting financial inclusion and its attendant economic benefits.

Achieving operational efficiency through technology can lead to a positive business model for serving the financially excluded. The poverty data above, expressed in terms of daily income, represents the maximum average per capita daily-spending capacity. A financial institution should be able to capture a portion of this consumer spending capacity to pay for its services, interest costs or commissions. Given that the value is low in absolute terms, achieving operational efficiency is a precondition for an economically viable business model for engaging with the excluded.

Thanks to demography, technology investments to digitize and optimize client engagement have a growing market of clients to be amortized. The large technological and operational investments required to set up the needed efficiency will benefit the revenue side with a growing number of clients in emerging economies. The economic impacts of millions of new customers entering the financial system every year are significant. Considering the United Nations data in Table 2, more than 120 million people become adults yearly. This is a large pool of prospective customers to tap to extract value, amortize technology investments and ensure financial inclusion.


In conclusion, financial inclusion is a critical component of economic development, and financial institutions must carefully balance customer acquisition and management costs with customer value. By meeting the necessary preconditions and using digitalization, financial institutions can reduce the operating costs associated with serving a single customer, expand access to financial services, promote economic growth and reduce poverty and inequality.



Francesco Di Salvo is a Senior Financial Sector Specialist at the World Bank’s Payment Systems Development Group. He provides technical assistance to governments and central banks, supporting policy reforms and implementations in areas related to the financial sector. Previously, Francesco held several positions with Mastercard and the European Central Bank.


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