The Next Billion Customers: Is Technology the Key to Closing the Global Gap in Financial Services?

Over 1.7 billion adults worldwide remain unbanked, but two-thirds of them own a mobile phone that could easily connect them to the financial services they need. Governments could leverage digital payments to bring wages, pensions, and services directly to their beneficiaries. Private sector banks could provide digital accounts, loans, and savings devices to a new, previously unreached market. And these unbanked adults could have safe and secure methods to save, invest, and transfer money.

The newly launched Global Findex Database 2017 provides detailed insights into the global challenges of financial inclusion. We see that since 2011, formal bank account ownership is up 18 percentage points to 69 percent globally and that financial technology has had a part in this. Twenty-one percent of adults in sub-Saharan Africa now have a mobile money account, which is nearly double the amount since 2014. And we know that many of these accounts are being used: 52 percent of adults in the past year used digital payments (a 10 percentage point increase since 2014).

Despite these fantastic gains, women are the majority of adults who are still left behind (65 percent of the unbanked). The 7 percent global gap in account ownership between men and women has not budged since 2011, a disparity that is exacerbated in poorer economies. We also know that a large portion of this stubborn gap is due to the gender digital divide. Women continue to be 50 percent less likely than men to be online or own a mobile phone. During last week’s Spring Meetings event, “Moving from Financial Access to Inclusion: Leveraging the Power of Technology,” World Bank President Jim Kim and H. M. Queen Máxima of the Netherlands spoke on the persistent gender gap in access to financial services. To achieve universal financial access by 2020, both stressed the need to link the financial sector with telecommunications and the technology sector. For women especially, innovations like digital payments address mobility constraints, while biometric ID systems offer privacy and independent control over their assets. But promoting technology to provide financial services is not new and has been in development conversations for years. And yet, women’s digital and financial inclusion has not accelerated. What’s slowing us down?

At CGD, we’re conducting several research streams to investigate how to create and supply successful tech products for women. Alan Gelb and Anna Diofasi Metz’s new book on harnessing digital ID for development investigates how biometric ID systems can encourage women’s economic empowerment. Digital ID can provide the poor and disadvantaged with a trusted, recognized, and verifiable identity, which allows governments and banks to expand their services to underserved beneficiaries while mitigating corruption and facilitating credit scoring. ID linked to digital payments may additionally provide women with a sense of agency. Research from Rajasthan, India suggests that social transfer programs built on the infrastructure provided by Aadhaar, India’s unique ID system, promoted a 66 percentage point increase in women’s account ownership. Gelb et al.’s research specifies that although this is a major step toward financial inclusion, biometric ID must be complemented by interventions that improve financial knowledge, literacy, and numeracy—educational barriers that women disproportionately face. 

CGD has also been piloting a randomized control trial that brings mobile financial services to women entrepreneurs in Indonesia and Tanzania. The studies, overseen by Mayra Buvinic and conducted by research partners in support of She Counts, address the knowledge gap that Gelb et al. identify by further providing and testing the effects of training on financial literacy and business practices. The table below provides a brief overview of the research designs.

 
While the intervention in Indonesia is currently underway results from the first follow up survey in Tanzania are promising and suggest that mobile savings bolstered by business training are the most impactful: on average, women receiving just the mobile savings intervention saved three times more money weekly than women in the control group, while those in the mobile savings plus business training group saved almost five times more.

The common thread throughout all our research is that technology plays a crucial part in providing financial services to the underserved, but in order to reach women—the majority of the unbanked— interventions must be gender-specific.

We hope you’ll join us at the event on May 1 for a discussion on making digital financial products work for women.

Read more about our work on gender and data and technology on our website.