The Importance of Financial Inclusion

Millions of people are unable to fully benefit from their hard work and sacrifice. This is because despite the rapid growth in digital banking which has unlocked new ways to pay, borrow and save many of them do not have access to basic financial services. Life for the unbanked and the underbanked is much harder than it would be if they had access to the financial services they need.

According to latest figures, over 20% of the global population or 1.7B people still do not have a bank account[1]. This is a phenomenon that hits poorest countries most, but even the richest countries have a large number of unbanked and underbanked citizens. In the USA, 13 million people don’t have access to bank accounts[2] while in the EU 13% of its citizens are underbanked[3]. This lack of access results in poverty, social exclusion, poor health and lack of education — robbing the unbanked and underbanked of a fair and fulfilling life.

The Impact of Financial Exclusion

The impact of inclusion falls into three categories: Social, Economic and Financial.

Social Impact

Enabling the billions of unbanked and underbanked individuals to gain access to the financial services we take for granted, will have a profound impact on society. An inclusive society is one that is fairer, more affluent, meritocratic and stable. By contrast,financial exclusion results in:

• Poverty: Without access to bank accounts, credit, or insurance, individuals struggle to generate and protect their income, perpetuating poverty cycles.
• Inequality: Financial exclusion widens the gap between rich and poor, affecting generational wealth and opportunities. This lack of access forces underbanked households into a vicious cycle, limiting education, skills development, and access to fair borrowing terms.
• Social Exclusion: Disparities in financial access often align with gender, race, and social stereotypes. Women, minorities, and marginalized groups frequently face barriers that hinder their ability to thrive in society, exacerbating systemic inequities.

Economic Impact

Contrary to outdated assumptions, wealth creation thrives in inclusive economies. Financial inclusion fuels entrepreneurship, productivity, and consumer demand, ultimately expanding the global economic “pie.” Yet even in affluent nations, millions remain unbanked — hindering their ability to contribute fully to economic growth. This can result in:

• Slower Growth: Financial exclusion stifles economic progress. Unbanked individuals miss out on earning returns on savings and accessing investment opportunities, leaving them vulnerable to inflation.
• Limited Entrepreneurship: Without access to growth capital, innovative individuals cannot start or scale businesses, reducing job creation and economic diversity.
• Dependence on Informal Finance: Financially excluded groups often turn to unregulated financial providers, exposing them to exploitative practices and financial instability.

Financial Impact

Financial inclusion is not just a moral imperative; it is a lucrative business opportunity. Institutions like Nubank in Brazil and mPesa in Kenya demonstrate that serving the underbanked can drive profitability, while addressing societal needs. Legacy processes often prevent traditional banks from adapting, but technology offers scalable solutions to bridge this gap. By being more inclusive, financial institutions can generate:

• Larger Customer Base: Inclusive strategies allow banks to reach new income-generating markets and clients, thus boosting revenues.
• Enhanced Profitability: Modernized processes for KYC, fraud detection, and compliance reduce costs and improve service delivery across all segments.
• Customer Loyalty: Providers of inclusive banking often retain loyal customer bases, even as competition grows.
• Reputation Building: Actively promoting financial inclusion strengthens brand image, appealing to consumers, employees, and investors.

The Path Forward: Harnessing Digital Innovation

The rise of fintechs, neobanks, and other challengers has reshaped banking and payments on a global scale. While these innovations offer immense potential, they inadvertently contribute to financial exclusion, creating disparities that impact society, the economy, and the financial ecosystem.

Digital banking is rapidly leading us into a cashless society, making it essential to develop inclusive solutions for all. Addressing financial exclusion requires collaboration across stakeholders, including fintechs, global banks, governments, regulators, tech firms, and end-users.

Surprisingly, access to technology is not the main barrier; in 2022, the World Economic Forum reported that of the 1.7 billion unbanked people globally, 1.1 billion owned mobile phones[4]. This disconnect highlights a deeper issue — a lack of tailored financial products for underserved segments.

To build an inclusive financial ecosystem, the champions of digital finance must:

1. Drive the Adoption of Inclusive Business Models: Financial institutions must leverage technology to lower the cost of serving underbanked populations profitably.
2. Champion Policy Reforms: Governments and regulators should create frameworks that encourage inclusivity while maintaining financial stability.
3. Raise Awareness: Promoting the social, economic, and financial benefits of inclusion can drive collective action.

Financial Inclusion is a Shared Responsibility

The fight against financial exclusion is about more than profits or fairness — it’s about building a resilient, equitable society. By leveraging technology and fostering collaboration, we can bridge the gap for the unbanked and underbanked, ensuring that the benefits of financial innovation reach every corner of society.

We should all campaign for a world where financial services empower everyone, creating shared prosperity for all. This vision is a reality within our reach.

[1] https://www.worldbank.org/en/publication/globalfindex/interactive-executive-summary-visualization

[2] https://www.worldbank.org/en/publication/globalfindex/interactive-executive-summary-visualization

[3] https://www.wsbi-esbg.org/number-of-unbanked-adult-eu-citizens-more-than-halved-in-the-last-four-years/

[4] https://www.weforum.org/agenda/2022/09/decentralized-finance-a-leapfrog-technology-for-the-unbanked/