Fintech and financial inclusion
Fintech - digital technologies as applied to finance - is playing an increasingly significant role in providing financial services and, therefore, in the degree to which communities are financially included. Here, we briefly examine the relationship between fintech and financial inclusion, and what impact this nexus might have on development outcomes such as gender, poverty, and the rural-urban divide. Fintech should not be viewed as a measure of financial inclusion in and of itself but as a means through which greater financial inclusion might be achieved. Fintech initiatives, such as mobile payments and peer-to-peer borrowing and lending, have decreased the costs of providing financial services, thus allowing households and firms great capacity to access these services. In the same way as the Internet and mobile communications have facilitated the provision of digital financial services, these services should lead to higher levels of financial inclusion.
Figure 1.11 presents three indicators of the use of the Internet and mobile communications for the five regions that are analysed here. The indicators are broad measures of the extent to which financial technologies are supporting the access and use of financial services either for payments or for banking services. They are, respectively, the percentage of adults (15+ years) who used the Internet to buy something online in the past year, the percentage of adults who used a mobile phone to pay bills in the past year, and those who used a mobile phone or the Internet to access a bank account in the past year. The ANZ and Plus3 countries clearly have a greater capacity to provide digital financial services, whilst South Asia and the CLMV, the least. This is consistent with the earlier analysis of the more traditional inclusion indicators. Figure 1.12 focuses on ASEAN5, the CLMV, and South Asia and introduces a variable capturing what proportion of the population possesses mobile money accounts. Mobile money accounts are not tied to accounts with financial institutions but are accounts where funds are held in digital wallets as part of a mobile money application. Interestingly, mobile
Figure 1.10 Saved for education, by region (2014).
ASEAN5 = Indonesia, Malaysia, Philippines, Singapore, Thailand; CLMV = Cambodia, Lao PDR, Myanmar, Vietnam Source: World Bank (2017a).
Figure 1.11 Internet use, by region (2017).
ANZ = Australia and New Zealand; ASEAN5 = Indonesia, Malaysia, Philippines, Singapore, Thailand; CLMV = Cambodia, Lao PDR, Myanmar, Vietnam; Plus3 = China, Republic of Korea, Japan
Source: World Bank (2017a).
Figure 1.12 Internet use and mobile money, by region (2017).
ASEAN5 = Indonesia, Malaysia, Philippines, Singapore, Thailand; CLMV = Cambodia, Lao PDR, Myanmar, Vietnam Source: World Bank (2017a).
Figure 1.13 Use of mobile phones for banking and bills payment. Source: World Bank (2017a).
money accounts are relatively more prominent in South Asia than in ASEAN5 and the CLMV.
Figure 1.13 provides another disconnect, in this instance, between the use of the Internet for banking versus for making payment. The Republic of Korea is higher in terms of the percentage of adults using the Internet to access existing accounts, whilst China leads (by double) the proportion of adults using the Internet to make purchases. This highlights China’s leading position in the area of digital payments.
Figure 1.14 shows the rate of growth in mobile money accounts between 2014 and 2017. These have clearly increased in ASEAN5 and South Asia (albeit from a low base) but have curiously decreased in the CLMV.
Figure 1.15 reveals the mobile money account data for 2017 by country. The first panel reveals that Malaysia and Singapore possess a greater proportion of adult populations with mobile accounts. The second panel shows that the high level of mobile money account ownership (and indeed growth, though not shown here) in South Asia is being driven by Bangladesh. The third shows the mobile money accounts for the CLMV countries for which there is data. Cambodia records the highest proportions there.
Figures 1.16 and 1.17 present some useful analysis on the possible gaps as they pertain to Internet use and mobile money accounts. Some interesting results emerge. A material gender gap is absent regarding the use of mobile phones or the Internet for ASEAN5 and the CLMV but is pronounced for South Asia. A gender gap exists for ASEAN5 and South Asia for mobile money
Figure 1.14 Mobile money account, by region (2014 and 2017).
ASEAN5 = Indonesia, Malaysia, Philippines, Singapore, Thailand; CLMV = Cambodia, Lao PDR, Myanmar, Vietnam Source: World Bank (2014, 2017a).
accounts but not for the CLMV. The results for South Asia are consistent with the gender gaps that exist for traditional financial inclusion indicators, but the gap for ASEAN5 is quite unexpected when compared to those more traditional measures. Gaps exist for income and education levels in line with what would be expected. Finally, for ASEAN5, a positive rural gap exists for mobile phones and the Internet. This suggests that rural areas can be well serviced through digital financial services. However, a negative gap exists for mobile money - suggesting that those in rural areas favour the use of technologies to access existing financial services.
