Digital wave drives surge in banking

But 2 billion people worldwide still ‘unbanked’

The number of people worldwide who have some type of bank account jumped 22% between 2011 and 2014, indicating that new technologies, such as mobile phone “wallets” and digitized payments, have made it easier for people in developing countries to connect to the formal economy.

Globally, 62% of adults have a bank account, up from 51% in 2011, the Global Financial Institution (Global Findex) database found. Global Findex, funded by the Bill & Melinda Gates Foundation, collects data on how people manage money and use financial services, such as banks.

Financial inclusion, such as the ability to save money, access credit and keep money secure, is considered critical for reducing poverty and increasing economic growth. World Bank Group President Jim Yong Kim called access to financial services “a bridge out of poverty.”

“Financial inclusion, at its most basic level, starts with having a bank account,” the report said.

The World Bank, which released the report Wednesday, said its goal is to have universal financial access by 2020.

“This is massive. It’s 700 million people in three years, twice the population of the United States,” says Ruth GoodwinGroen, managing director of the Better Than Cash Alliance at the United Nations Capital Development Fund in New York.

Widespread adoption by governments, businesses and aid groups of digital payments encouraged the growth in bank accounts, Goodwin- Groen said. Businesses and large institutions like digital payments for efficiency, tracking payments, avoiding corruption and security, but it’s also good for the economy and consumers, she said.

“If you’ve just been paid and you’ve got a big wad of cash in your pocket, you’re vulnerable,” Goodwin- Groen said. “If you have an account, you have a place where you can save it. You’re not tempted to spend it. It helps people manage their money.”

Still, 2 billion people worldwide remain “unbanked,” including 1.1 billion women. Regionally, South Asia accounts for nearly a third of the people without bank accounts. The report said another 400 million people would open bank accounts If more governments and private businesses adopt digital payments.

In high-income countries, such as the United States, bank accounts are nearly universal, the report found. A 2013 survey by FDIC found 7.7% of U.S. households are “unbanked.”

In developing economies, the percentage of adults with bank accounts ranges widely from 14% in the Middle East to 69% in East Asia and the Pacific, the report said. The report also found stark differences for men and women, with 65% of men and 58% of women having a bank account.

Account ownership grew significantly in China and India between 2011 and 2014 — in China, account penetration rose from 64% to 79% or 180 million adults, and in India from 35% to 53% or 175 million adults, accounting for about half of the 700 million new account holders globally.

Mobile phone-based money services that offer “mobile wallets” drove growth in Africa.

Worldwide, 2% of people have mobile phone-based services that allow customers to send and receive money electronically with- out having a bank account at a traditional financial institution. In sub-Saharan Africa, about a third of all account holders — 12% of all adults — have a mobile account. In Cote d’Ivoire, Somalia, Tanzania, Uganda and Zimbabwe, more adults have mobile phone money accounts than bank accounts, the study found.

Mobile money accounts have grown rapidly over the past three years. The report found 259 mobile money service deployments in 89 countries at the beginning of this year, up from 100 deployments three years earlier. In East Africa, mobile money accounts push overall account ownership up from 26% to 35%.

The accounts are the first step in financial inclusion for people in developing countries, says Stephen Kehoe, senior vice presi- dent of global financial inclusion for Visa. Consumers must also have access to credit, insurance products, pensions and the full range of financial services, he said. They also need to have places that accept their payment accounts, he said.

Visa is working with small merchants in developing countries to equip them with point-ofsale terminals that operate over mobile phones so they can process digital financial transactions, an endeavor that has good social impact, but also makes business sense for Visa, he said.

“This is all headed in the right direction, but we’ve still got a long way to go and a lot more to do,” Kehoe said. “We now need to focus not on just having an account but the quality of that account.”

“If you’ve ... got a big wad of cash in your pocket, you’re vulnerable. (A bank account) helps people manage their money.”

Ruth Goodwin- Groen,

Better Than Cash Alliance