Responsible Finance Forum

Financial Inclusion in the Digital Age

Anju Patwardhan, Ken Singleton and Kai Schmitz
29 March 2018
Source:  IFC, CreditEase, Stanford Business Graduate School

Billions of adults across the globe lack access to the financial services they need to achieve even modest levels of financial well-being. Many households and small businesses in emerging markets have no or very limited access to formal financial services. Even in developed countries, they only have access to a limited menu of cost-effective products from financial institutions for addressing their financial needs. Over two billion unbanked adults in the world, representing 38 percent of all adults globally, do not have access to basic financial services and another 57 percent have basic accounts but do not have access to diversified investments, low-cost payments systems, core household and business insurance, or credit.

The resulting poor financial wellness—indeed, for many households and small businesses, the resulting financial insecurity—is not is not just a low-income bottom-of-the-pyramid problem in the unbanked population in developing economies. It has been democratized with growing income inequalities in developed economies too, and now is an issue for nearly half the American population.

Achieving financial inclusion and financial security is not an end in itself, but a means to an end. It is broadly recognized as critical to reducing poverty and achieving inclusive economic growth. It also has positive effects on consumption, employment status and income, and on some aspects of physical and mental health. Greater financial inclusion is one of the key priorities of the United Nations’ Sustainable Development Goals as it enables poorer households and informal economies to increase resilience and capture economic opportunities.

This report highlights some of the central frictions that prevent greater financial inclusion and financial well-being, and associated technological innovations that are fostering creative new approaches to mitigating these frictions for individuals and small businesses globally.

We are witnessing the emergence of ‘for-profit, mission-driven’ financial technology (Fintech) players focused on enabling greater financial inclusion. A financial revolution is taking place around the globe, powered by mobile phones, access to new data, technological innovations and changing mindsets of users of financial services. These Fintech companies are fostering new approaches to mitigating frictions by designing novel products, or following innovative business strategies, with the common end goal of enhancing financial inclusion. They are increasing the financial capacities of households and organizations worldwide.

At the end of this report, we provide a list of 100 Fintech companies globally that are supporting ‘Financial Inclusion in the Digital Age’ across four main “verticals” of impact: payments, lending and related ecosystem, savings and financial planning, and insurance. These companies are mission-driven but are also focused on providing attractive risk-adjusted returns to their investors.