What is Digital Financial Inclusion?

Definition

Digital financial inclusion means that any individual has equal access to the same financial services and products that allow them to participate in making and receiving payments online.

Read more about the topic from the World Bank.

Scope of the Problem

1.4 billion people remain unbanked and locked out of traditional financial systems that could expand their economic participation, flexibility, and potential. Many people are forced to use proprietary services to transfer or receive money because traditional payment systems have been built to not work together. Business growth and expansion is limited and economies are restricted by the lack of participation and the costs associated with cash and other paper-based payment instruments.

Alternate financial services are now available, but barriers for people on the margins of financial systems remain and could even grow. Digital payments are only relatively easy if the sender and recipient have accounts on the same network. Payments between different networks are slow and expensive, preserving many of the costs and inefficiencies that have long been a barrier to financial inclusion.

The unbanked pay four times more in fees to access their money than those with bank accounts, and pay an average of $4 more in fees per month for cash access than those with formal financial services.
The International Labor Organization estimates that over 60% of the world’s adult labor force operate in the informal sector (activities that produce economic value but are not formally registered)—at least part time. On average, it represents 35% of GDP in low- and middle-income countries versus 15% in high-income countries.
Costs of financial exclusion also fall harder on women. Globally, 58% of employed women work in the informal sector, and are more likely to be in the most precarious and low-paid categories of informal employment. In sub-Saharan Africa, women’s average share of informal employment in the region’s nonagricultural sector is 83%.
In four economies studied – Canada, Brazil, Germany and South Africa – 90% of merchants have an online presence, but only 20% have an e-commerce website. This is because merchants lack access to technology that allows them to accept online payments.