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COVID-19 drives global surge in use of digital payments

3 years ago
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COVID-19 drives global surge in use of digital payments

The COVID-19 pandemic has spurred financial inclusion – driving a  large increase in digital payments amid the global expansion of formal financial services. This expansion  created new economic opportunities, narrowing the gender gap in account ownership, and building  resilience at the household level to better manage financial shocks, according to the Global Findex 2021  database.  

As of 2021, 76% of adults globally now have an account at a bank, other financial institution, or with a  mobile money provider, up from 68% in 2017 and 51% in 2011. Importantly, growth in account ownership  was evenly distributed across many more countries. While in previous Findex surveys over the last decade much of the growth was concentrated in India and China, this year’s survey found that the percentage of  account ownership increased by double digits in 34 countries since 2017. 

The pandemic has also led to an increased use of digital payments. In low and middle-income economies (excluding China), over 40% of adults who made merchant in-store or online payments using a card,  phone, or the internet did so for the first time since the start of the pandemic. The same was true for more  than a third of adults in all low- and middle-income economies who paid a utility bill directly from a formal  account. In India, more than 80 million adults made their first digital merchant payment after the start of  the pandemic, while in China over 100 million adults did.  

Two-thirds of adults worldwide now make or receive a digital payment, with the share in developing  economies grew from 35% in 2014 to 57% in 2021. In developing economies, 71% have an account at a  bank, other financial institution, or with a mobile money provider, up from 63% in 2017 and 42% in 2011.  Mobile money accounts drove a huge increase in financial inclusion in Sub-Saharan Africa. 

“The digital revolution has catalyzed increases in the access and use of financial services across the world,  transforming ways in which people make and receive payments, borrow, and save,” said World Bank  Group President David Malpass. “Creating an enabling policy environment, promoting the digitalization  of payments, and further broadening access to formal accounts and financial services among women and  the poor are some of the policy priorities to mitigate the reversals in development from the ongoing  overlapping crises.” 

For the first time since the Global Findex database was started in 2011, the survey found that the gender  gap in account ownership has narrowed, helping women have more privacy, security, and control over  their money. The gap narrowed from 7 to 4 percentage points globally and from 9 to 6 percentage points in  low- and middle-income countries, since the last survey round in 2017.  

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About 36% of adults in developing economies now receive a wage or government payment, a payment for  the sale of agricultural products, or a domestic remittance payment into an account. The data suggests that  receiving a payment into an account instead of cash can kickstart people’s use of the formal financial  system – when people receive digital payments, 83% used their accounts to also make digital payments.  Almost two-thirds used their account for cash management, while about 40% used it to save – further growing the financial ecosystem.

Despite the advances, many adults around the world still lack a reliable source of emergency money. Only  about half of adults in low- and middle-income economies said they could access extra money during an  emergency with little or no difficulty, and they commonly turn to unreliable sources of finance, including  family and friends.  

“The world has a crucial opportunity to build a more inclusive and resilient economy and provide a gateway  to prosperity for billions of people,” said Bill Gates, co-chair of the Bill and Melinda Gates Foundation,  one of the supporters of the Global Findex database. “By investing in digital public infrastructure and  technologies for payment and ID systems and updating regulations to foster innovation and protect  consumers, governments can build on the progress reported in the Findex and expand access to financial  services for all who need them.” 

In Sub-Saharan Africa, for example, the lack of an identity document remains an important barrier holding  back mobile money account ownership for 30% of adults with no account suggesting an opportunity for investing in accessible and trusted identification systems. Over 80 million adults with no account still  receive government payments in cash – digitalizing some of these payments could be cheaper and reduce  corruption. Increasing account ownership and usage will require trust in financial service providers,  confidence to use financial products, tailored product design, and a strong and enforced consumer  protection framework.  

The Global Findex database, which surveyed how people in 123 economies use financial services  throughout 2021, is produced by the World Bank every three years in collaboration with Gallup, Inc. 

Tags: COVID-19 drives global surge in use of digital paymentsCOVID-19 pandemicWorld Bank
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