Digitization of financial services is a game-changer after the pandemic

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The Covid-19 pandemic has stalled much progress over the past three years, but for financial inclusion it has been a catalyst that has driven a surge in digital payments as part of the global expansion of financial services formal.
According to the World Bank’s Global Findex 2021 database, this expansion has created new economic opportunities, narrowed the gender gap in account ownership, and built household resilience to better manage financial shocks.
Financial inclusion is important and is the cornerstone of development. When people have a financial account, it allows them to take advantage of other financial services like savings, payments, access to credit.
Today, in developing countries, 71% of people have an account, compared to 42% ten years ago. (Globally, 76% of adults worldwide have an account today, up from 51% a decade ago.)
These huge wins are now spread more evenly and come from more countries than ever before.
The strongest growth has been in the use of digital payments, which surged during Covid-19 mobility restrictions and when cash was perceived as unsanitary.
According to the World Bank, two-thirds of adults worldwide now make or receive a digital payment.
In developing countries outside of China where digital payments are prevalent, some 40% of people who made a digital payment from their account did so for the very first time since the pandemic began.
Digital payments are generally safer and more convenient, and can be a gateway to other financial services. Data from Findex shows that adults who receive payment in an account in developing economies use financial services more than the average adult.
In developing economies, 36% of adults have received a payment in an account such as private or public sector salary payments, government transfers or pension payments.
Of the 36% who received a payment to an account, 83% also make a digital payment, about two-thirds use the account to store money for cash management, and about 40% say they use their account to save or To borrow money.
“The Covid-19 pandemic has highlighted the fundamental role that digital infrastructure can play in the rapid delivery of services and social assistance to people. The integration of digital ID, digital payments and trusted data-sharing platforms is essential to serving the poor at scale and connecting communities to opportunity,” said Christine Zhenwei Qiang, Global Practice Director of digital development.
Globally, some 1.4 billion adults are still unbanked. These people are the hardest to reach – and most often women, the poorest, least educated and living in rural areas.
“To achieve them, governments and the private sector will need to work hand in hand to forge the policies and practices needed to build trust in financial service providers, trust in the use of financial products, new designs of tailored products, as well as a robust and enforceable consumer protection framework,” says Leora Klapper, lead author of the Global Findex report.
While digitizing government and other payments is the way forward, there is still a long way to go. Governments, private employers and financial service providers, including fintechs, should work together to reduce barriers to access and improve physical, data and financial infrastructure.

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