> Posted by Sonja Kelly, Fellow, CFI

In 2013, Elisabeth Rhyne was asked what she was particularly excited about as she looked forward to the future of financial inclusion. Her response? “A second data point.”

Well, now we have that second data point. The 2014 Global Findex reports that 62 percent of people in the world have a bank or mobile money account, up from 51 percent in 2011, and those two points describe a line. Simply projecting that line forward takes the world to about 83 percent of people with accounts by the year 2020. But of course, that’s not the whole story…

The Global Findex encouragingly articulates some concrete steps that governments and providers can take to accelerate progress toward financial access. I would venture to guess that these steps would bridge the gap between the projected 83 percent and the full 100 percent by 2020 (you can read about the World Bank’s goal of universal access by 2020 here).

So let’s just assume that universal access will be a reality by 2020. We can envision a world in the near future where people receive wages, government payments, and remittances into their bank accounts. Businesses spend less on payroll and have fewer risks than if they paid out in cash. Governments avoid corruption associated with social benefit payments by having a cheaper G2P system that entails fewer human intermediaries. Remittances are cheap—or even free—and go directly into the recipient’s bank account. Cause for celebration, right?

Well, yes, but not so fast.

What’s missing from this world is a description of the quality of financial services for the customer. Financial access will mean a lot of good things for a lot of stakeholders—reduced corruption, lower cost of employment, and massive savings for government, to name a few. But financial access does not necessarily mean improved lives for the two billion people around the world who may have a new account by 2020.

Full financial inclusion is a lot more than access to a transaction account. Services will have to come with quality in order to be relevant to consumers. If products are well-designed to meet the needs of consumers, then we will have a great deal to celebrate by 2020. But if customers receive wages, government payments, and remittances into a bank account and then withdraw them right away, financial inclusion will have just created a different (but only marginally better) way for people at the base of the economic pyramid to interact with their money.

At our FI2020 roundtable co-hosted with the Institute for International Finance (IIF) this week, one of the themes that emerged was this difference between access and quality. You can give a person an account, but if the account sits unused, or if it serves the same function that a cash payment would serve, or if the owner of the account doesn’t even remember they have it, its use is minimal or even nil.

Instead of trying to fit people to existing products, financial inclusion has a responsibility to fit products to people’s needs. We have the tools to create products for the mother who wants to pay her child’s school fees without carrying a pile of cash to the school on the first day of the term, for the family who wants to create a new floor in their house but needs a loan, or for the older person who needs to receive her pension but cannot walk all the way to the post office to collect it. Financial inclusion is a vision for improved lives—and financial services are just a means to an end.

Getting back to the Findex, I was most excited this year by the question that started to address this “so what” issue of financial services. The questionnaire asks respondents, “Could you come up with [insert 1/20 of GNI per capita here] in the next month if you had to?” (In the US, 1/20 of GNI per capita is about $2,600 just to provide some perspective.) In developing countries, 26 percent of people reported they would be able to come up with the money from their own savings. But more than half of this group said that they do not save in a formal financial institution—and if they had the right product it is possible their answer wouldn’t be “no”. Now that we are well on our way to addressing the problem of lack of access to financial services, let’s start to turn the conversation to quality so that we can achieve not just access but full financial inclusion.

Have you read?

Sixty-Two Percent of the World Is Banked, the New Global Findex Finds

Global Leaders Issue Commitments to Universal Financial Access by 2020

Announcing the Launch of the Global Financial Inclusion (Global Findex) Microdata