The World Bank recently released ‘The Global Findex Report 2021’, a comprehensive survey that included more than 125,000 adults across 123 economies during the Covid-19 pandemic. The aim of this report was to gain a better understanding of how individuals use formal and informal financial services and digital payment systems.
Understanding Account Ownership
According to the report, account ownership worldwide saw a significant increase of 50% during the pandemic. It now stands at 76% of the global adult population. This growth has been widespread across many developing economies, with a large number of new accounts being opened in India and China. Despite these promising figures, substantial portions of the world population still lack access to formal banking services, especially in populous countries like India and China.
The Challenges of Formal Banking Access
Barriers to formal banking access are numerous and multifaceted. A significant section of the global population, approximately 130 million in India and 230 million in China, do not have access to these services due to issues such as lack of official identification, limited access to technology such as mobile phones, and lower levels of financial literacy. Women, in particular, face these challenges more often. The report noted that while 74% of men had an account in developing countries, the figure for women trailed six points behind at 68%.
An Analysis of Unbanking
The study found that about 24% of adults worldwide are unbanked, indicating they don’t have an account at a financial institution or a mobile money service provider. Various reasons contribute to this phenomenon, including lack of funds, distance from financial institutions, and expensive financial services. Interestingly, the report states that 64% of unbanked adults globally possess only primary education or less, pointing towards the role of education in financial inclusion.
The Impact of Covid-19 on Digital Payments
The Covid-19 pandemic acted as a catalyst for the growth of digital payments throughout the world. In developing countries, 18% of adults paid their utility bills directly from an account in 2021. Surprisingly, one-third of these individuals were paying online for the first time. Mobile money has emerged as a key driver of financial inclusion, especially in Sub-Saharan Africa.
The Role of Financial Providers and Government
Government agencies, private employers, and financial providers have played a crucial role in expanding financial access and usage among the unbanked by lowering barriers and improving infrastructure. Financial inclusion has become a cornerstone for both short-term relief and sustainable recovery efforts in the wake of the Covid-19 pandemic.
Financial Worries and Concerns
Adults in developing countries are more likely to worry about finances compared to those in high-income countries. Medical expenses are a top concern, particularly in Sub-Saharan Africa and South Asia, where 64% of adults are very worried.
Recommendations for the Future
As we move towards a post-pandemic world, governments must expand access to digital banking services while ensuring protections for the most vulnerable sections of society, including women, the poor, and those with lower educational attainment or financial literacy. Addressing the gender gap in mobile access is critical to ensure equitable progress on financial inclusion.
