How To Increase Digital Financial Inclusion In Developing Countries
Digital payments and financial literacy are go hand in hand.
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Whether it’s MPESA, WeChat, stablecoins, CBDC, or QR payments mobile payments are fintech’s greatest achievement as they continue to bring financial inclusion to the world’s vulnerable.
This great paper by GFTN and the FutureMatters Centre of Excellence shows how collaboration between government and financial institutions plays a pivotal role in financial inclusion.
While mobile payments have been an overwhelmingly positive force for financial inclusion worldwide, they have also caused some debt and sorrow.
China and India are great examples of nations where, soon after the introduction of mobile payments, there was a proliferation of high-interest loans that newly included citizens didn’t fully understand, with devastating results.
I point this out not because mobile payments are bad, China’s WeChat and India’s UPI are considered textbook examples of fintech bringing financial inclusion, but because financial inclusion isn’t always easy.
This also shows why the first of the four recommendations below, pairing financial literacy with inclusion, was learned the hard way.
The other key piece of “digital public infrastructure” required for inclusion is national ID systems like India’s Aadhaar, which allow linking of digital ID, mobile number, and bank accounts. Digital ID's foster digital innovation and ensure that citizens aren’t left behind.
Financial inclusion is an “investment” in our shared future, and will likely be viewed as fintech’s greatest achievement.
👉Four Recommendations for Increased Financial Inclusion:
1️⃣ Explore ways to improve digital as well as financial literacy
Digital inclusion should encompass digital financial inclusion requiring some form of digital literacy. Trusted digital infrastructures, such as national identity programs and interoperable platforms, lead to digital inclusion by enhancing transparency and reducing fraud risks. This type of digital inclusion supports financial inclusion as well. Collaborations between governments, banks, and private sector actors are vital.
2️⃣ Collaborate with traditional financial institutions to design new digitally enabled products and services.
Driving digital transformation requires a focus on inclusive innovation and infrastructure. Institutions like the IFC can fund infrastructure and advisory services preconditioned on these principles. Intuitive UI/UX design, as seen in Africa’s mobile money platforms, has simplified adoption as well as reduced reliance on slow-to-scale financial literacy efforts.
3️⃣ Work with regulators to develop necessary digital infrastructure like digital ID and electronic signatures to enable the expansion of financial services.
Expanding financial services requires robust digital infrastructure to maximise inclusion. Outdated regulations, fragmented systems and inefficient identification processes hinder progress and inclusion efforts. Universal adoption of eKYC, open banking, and centralised credit bureaus can streamline customer validation and build trust.
4️⃣ Design scalable financial products and services
Designing scalable financial products requires collaboration with vendors, distributors, and MSMEs to understand customer needs and create tailored solutions. Integrating financial services into platforms like those serving e-commerce or logistics needs can foster wider adoption. Digital tools, including online banking, AI-driven credit scoring, and cross-border payments, enhance efficiency and access.
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