How to promote digital savings, financial inclusion – World Bank Group

A banking hall [Photo credit: Nigerian Times]
A banking hall used to illustrate the story [Photo credit: Nigerian Times]

The World Bank Group has identified three policy considerations as critical factors for the growth of digital savings and the promotion of financial inclusion across the world.

A new report by the bank listed the policies to include conscious efforts to enable banking institutions to pursue digital savings partnerships with nonbank entities; supporting the development of interoperability between banks and nonbank e-money issuers and harmonising customer due diligence standards for e-money wallets and low-risk bank deposits.

Tagged “Financial Inclusion Beyond Payments: Policy Considerations for Digital Savings”, the report noted that, across the developing world, financial institutions have leveraged digital technologies and innovative business models to expand access to digital financial services (DFS), such as digital transaction accounts and payment services. These, it said, served as the gateway to financial inclusion.

The report said providers are now diversifying their products offerings to newer DFS, such as credit, insurance, and savings. It said access to reliable savings products, at regulated financial institutions, is important for helping low-income and financially underserved segments meet their long-term saving goals.

Flipside

However, the report noted that significant gaps exist in developing regions between the proportion of adults who save and those who save at a financial institution.

The gaps owe, in part, to limited access to savings products among low-income and rural populations, and to the perception among low-income individuals that their savings are not large enough to warrant a savings product at a financial institution, which may entail maintenance fees, minimum balance requirements, and high indirect access costs (e.g., transportation, time).

Thus, the report noted that accessible, flexible, and affordable digital savings products could bring existing informal saving into the regulated financial sector.

Among the 36 digital savings accounts examined in the report, three primary deployment models have taken shape, details showed. Similarly, partnerships between banking institutions and NBEIs, such as mobile network operators (MNOs) and other finance-technology companies, are common in the provision of digital savings accounts.

“MNO partnerships account for a greater share of the digital savings account deployments in SSA than in Asia, which reflects the historically MNO-centric DFS approach in SSA and contrasting bank-oriented DFS patterns in a number of Asian countries,” the report noted.

The report also found out that digital technology and innovative business models enable product and market properties that enhance savings account accessibility.

Digital savings represents a relatively new area of inquiry for digital financial inclusion research, the report said, although it focused on supply-side factors in the digital savings market.

“As products mature and more data become available, researchers will be able to evaluate questions that bring together supply and demand side factors, thus developing a clearer picture of what works best in the digital savings market,” it added.

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