Innovation and technology have emerged as powerful catalysts in advancing financial inclusion. The spread of digital technologies, through mobile banking, digital wallets, payment platforms and more, has helped to make financial services more efficient and more accessible. Innovations, such as the use of agent networks and embedded finance, can make financial services more user-friendly and bring them closer to home for people living in remote areas or on low incomes. Many of these technology-enabled business models have the distinct advantage of achieving greater efficiency and scale, something microfinance institutions (MFIs) have traditionally struggled with. However, questions remain around whether they can reach the same underserved customers as MFIs, and whether they can do so responsibly while also meeting investor demands.
As new and more powerful technologies like artificial intelligence are developed, we will continue to see the transformation of financial inclusion. The sector will need to remain vigilant to ensure that the new risks introduced are understood and mitigated, while the potential for improving people’s lives is explored and maximized.
Agent Networks | Data | Digital Financial Services | Digital Transformation | Fintech
Using Artificial Intelligence in Inclusive Finance
Artificial intelligence (AI) is increasingly becoming a transformative force in the realm of financial inclusion, offering the potential to extend financial services to underserved and unbanked populations around the world. By leveraging AI, financial institutions can analyze vast amounts of data to gain insights into customer behavior, tailor products to individual needs, and streamline decision-making processes for credit scoring and loan approvals. This can lead to more accessible and affordable financial services, such as microloans, insurance and savings products, which are crucial for economic empowerment. However, the integration of AI also introduces risks, such as algorithmic bias, which can perpetuate existing inequalities, and concerns over data privacy and security. Ensuring that AI systems are transparent, ethical, and well-regulated is essential to maximize their benefits and minimize potential harms in the pursuit of greater financial inclusion.
(As evidence of the growing capabilities of AI, the above introduction was written by AI itself, via ChatGPT)
This report aims to inform practitioners and policymakers about ways in which innovations in credit scoring can advance financial inclusion while ensuring fairness and protecting consumers.
This report assesses the impact of AI on the financial services industry, including fintechs and traditional financial institutions, from efficiency to productivity and profitability, as well as persistent organizational adoption and scaling challenges. It also highlights developing policy and regulatory approaches.
Partnering With Fintechs to Advance Financial Inclusion
Fintech, from “financial technology,” is a growing industry that uses technology to improve financial services. Many fintech companies are start-ups aiming to disrupt traditional banking processes or offer entirely new value propositions. Others work in partnership with MFIs or other financial service providers, helping to expand product offerings and improve customer experience.
Fintech solutions have the potential to advance financial inclusion by offering customers faster, more convenient and more affordable ways to use financial services. They can bring unserved customers into the financial system with innovations such as mobile money, digital payments, alternative credit scoring using big data analysis, biometrics for client on-boarding processes and blockchain technology for payments.
Of course, there are also important risks involved with the growing use of fintech solutions and emerging technologies. Among others, these include risks related to serving low-income customers responsibly, data privacy, business model viability, governance and cybersecurity. Both fintech companies and policymakers need to understand these risks and take appropriate action to mitigate them. Regulation plays an important role in making sure that customers are protected and that fintech can fulfill its promise for financial inclusion.
This report focuses on the policy and regulatory enabling environment landscape in Tanzania as it relates to fintech, e-commerce, and funding.
This mixed-methods study examines how fintech is narrowing the financial gap for unbanked people in India using quantitative econometric analysis and qualitative case study assessments.
This report presents findings from the latest Financial Access Survey round and the 2024-2025 Pilot exercises, complemented by additional data sources, to assess the growth of the fintech industry and its implications for financial access, financial use, and financial stability.
Going Digital Everywhere
With the rapid global expansion of mobile technology, digital financial services (DFS) have helped vast numbers of previously excluded people access financial services. A number of governments and their central banks have embarked on “cash-lite” policies to reduce the use, and therefore cost, of cash in their economies. DFS models are being tested with varying degrees of success around the world. Safaricom's M-PESA in Kenya is probably the best known and most successful example of mobile banking. Its vast success sparked a wave of start-ups and partnerships that use the service to provide Kenyans other valuable services, such as utility payments, savings accounts and microinsurance. Researchers are studying successes and failures of digital financial services to understand the market forces, business models and ecosystem requirements to support successful DFS deployments elsewhere around the world.
Digital financial literacy programs are most effective when localized, which means more than just translating into the local language. Here are five ways to adapt content to promote safer, more confident digital finance use.
Banks and MFIs have often overlooked women nano-entrepreneurs as too costly to serve. But by reaching them through trusted savings groups and digital tools, financial institutions are finding viable ways to serve segments traditional lending has missed.
While mobile money usage has skyrocketed in Nigeria, barriers remain around education, identity and digital access. If these obstacles are overcome, mobile money can become a true catalyst for opportunity and resilience.
Exploring Emerging Innovations in Financial Inclusion
As technology advances, innovations continue to emerge which can support and even transform financial inclusion. Embedded finance, open finance, digital currencies and platform work are examples of approaches currently being studied and discussed in the sector. All of these innovations support financial inclusion by bringing financial services more directly to customers, many of whom have never used formal financial services before, in ways that are more convenient and accessible and provide more choice.
Embedded finance, also known as banking as a service, involves the integration of financial tools into non-financial platforms, such as e-commerce or gig work.
The rise of platform work, such as ride-hailing and delivery apps, can help bring unbanked customers to the formal financial system by integrating their payments and other financial services into the gig platform.
Open banking, also called open finance, refers to the practice of sharing consumer transaction data between financial institutions and other FSPs and third party providers such as fintechs, which can use the rich datasets to design more useful and user-friendly financial products for customers.
Open APIs (application programming interfaces) are a subset of open banking, in which financial service providers (FSPs) share their APIs with other companies, allowing them to incorporate the FSPs' financial services, such as payments, into other apps like shopping platforms.
The Financial Action Task Force (FATF) defines a virtual currency, also often called digital currency, as "a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status in any jurisdiction." This is as opposed to "fiat currency," which is the legal tender issued by a country in the form of coin and paper money, and which can be represented as e-money for electronic transfers.
Cryptocurrencies are math-based, decentralized convertible virtual currencies that are protected by cryptography. Bitcoin, launched in 2009, is the most famous example. Because of the tendency for cryptocurrencies to fluctuate in value, stablecoins were developed as a type of cryptocurrency designed to have a relatively stable price, usually by being pegged to another currency, commodity or financial instrument.
Central bank digital currencies (CBDCs) are a form of digital money issued by a country's central bank and denominated in the country's unit of account. If it is intended for use as a digital cash equivalent by individuals such as households and businesses, it is referred to as a retail CBDC.
This paper reviews current pricing practices in open finance, assesses how these models influence key objectives such as competition and innovation, and considers how different open finance archetypes shape the feasibility of various pricing approaches.
As open finance regimes proliferate, consumer experience frameworks must lay the foundation for consumer empowerment and protection.