The Financial Inclusion 2020 project at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

As people age, their use of financial services changes. We explored this in detail when we published a lifecycle approach to financial services in Peter Kasprowicz and Elisabeth Rhyne’s Looking Through the Demographic Window. People of working age need to plan for the future while also providing for their families in the present. People who are elderly need to be able to draw on their savings, manage their wealth, and in many cases, draw on and use their pensions.

When we look at the world as a whole, we see little difference between bank account ownership among the working age population (defined as ages 25 to 64) and those who are older (age 65+):

Source: World Bank Global Findex Microdata, 2012

This global equality between the two age groups masks interesting variation in regions in account ownership by age. In Sub-Saharan Africa and East Asia and the Pacific, a much higher percentage of working age adults than older adults have accounts, while Latin America and the Caribbean shows little difference between those groups.

Source: World Bank Global Findex Microdata, 2012

And in the Middle East and North Africa, the elderly have a higher rate of bank account ownership than their younger counterparts.

Financial needs across the lifecycle follow major life events and are therefore person-dependent. A person could, for example, have children at age 18 or at age 35, and the difference changes the way she thinks about her personal finance management.

While we do see differences in regions when it comes to the ownership of accounts, there is more uniformity among regions when we look at use of accounts.

Source: World Bank Global Findex Microdata, 2012

In all regions (excluding out high income economies), frequent use of accounts peaks in the working age years. Those who are 65 and older use their accounts much less actively than those who are younger. Possibly, one explanation of this trend is that people who are older might not receive wages into their accounts. Beyond this explanation, there may be other factors at play, like a lack of financial literacy, a reliance on younger family members or friends for regular financial support, or simply the decision not to use accounts as a money management tool.

When we zoom in on the population aged 65+, therefore, we notice that the financial inclusion community may not truly understand how people are using financial services, and what kinds of financial needs they have. Elisabeth Rhyne discusses this lack of understanding as it pertains to income groups in a recent blog post. The difference between access and use is tremendous in many regions and presents an important frontier to consider as we recognize the financial services needs of people across their lifecycles.

Continuing to spotlight different segments of national populations will be critical as we move toward understanding how financial inclusion will be achieved for all people. Increasing life expectancy around the world, coupled with rapidly aging working populations means the elderly have become a critical population segment.

For a further discussion on demographics as an important window through which to view financial inclusion, see Elisabeth Rhyne and Peter Kasprowicz’s paper here. For more on the Global Findex, visit the World Bank here.

*In most countries surveyed by the World Bank Global Findex, the overall sample size was large enough to generalize to the population. When we break out the data by age, however, the data are not necessarily as reliable to apply to the whole countries or regions. We did nevertheless weight the surveys according to the World Bank’s calculations.

For more information on Financial Inclusion 2020, sign up for project updates.

Have you read?

Age Ain’t Nothin’ But a Number

Microfinance as a Tool of Active Aging

Aging and Financial Services: With and Without Employment

The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”

What’s in a number? Part of the Center’s Financial Inclusion 2020 work is to think about how global trends affect financial inclusion demand—we’ve been doing so in our Mapping the Invisible Market work and in our exploration of the client perspective.

In this work, it can be useful to think in terms of age. In our demographic work we examined how a person’s stage in life might affect his or her demand for financial services. We also discovered that many developing countries have rapidly aging populations. But just how rapidly the populations are aging depends on the definition of old. When calculating dependency ratios (the ratio of those who are dependent to those who are in the working age population), the UN recommends the following definitions:

• “Child” is a person under the age of 15
• “Youth” is a person aged 15-24
• “Old age” is age 65 and above

Percent of the global population that is elderly, with varying age cutoffs, 2011.

These standards are often invoked in country comparisons. But are they really appropriate? If “older adults” are 65 and over, what does that mean in very poor countries, especially in Africa where the life expectancy is under 55 years? If we calculate “older adults” as age 60 and up, then they make up over one-fifth of the global population. If we calculate the same group as 75 and up, they are less than one-tenth of the global population.

Indeed, the age delineations seem to break down when we look at particular contexts. For example, the National Corrections Institute, a U.S. prison research organization, defines “elderly” as 55 or older because an incarcerated person’s body ages faster than someone not in prison.

As we look at differentiating by age in our work with financial inclusion (or in any work for that matter), how do we move forward meaningfully? In defining “old,” age is certainly one factor, but so is culture, health, lifecycle stage, income, and a host of other factors.

Tim Nourse, of Making Cents International, concurs that broad age groups, while convenient, mask important nuances. That’s why Making Cents (which uses the 15-24 age range for youth as a starting point for discussions) recommends segmenting the market further through market research. One of Making Cents’ emerging guidelines for youth financial services is:

“Develop products and services that reflect the diversity of youth: The youth market contains sub-segments related to age (legal age), life cycle stage (marital and parental status), gender, education, employment status, and vulnerability. These differences should be taken into consideration in product design and delivery.”

What becomes important, as Tim points out, is not the age that we choose as a dividing line, but rather what the age represents. We have age cutoffs for several reasons. First, and most obviously, there are legal definitions to be considered, especially when it comes to youth and informed consent. Second, however, we choose age as a dividing line based on the major life events that we predict in the lives of individuals. Someone who is considered a “youth” becomes an “adult” at age 25 because on average people are making major life changes at that point: marriage, children, and even the first steps in a career become realities. We use age 65 because this is another major transition point—people in formal employment often shift from earning money to using money they have saved or relying on non-work related sources of income. Our work on demographics discusses the need to use a lifecycle approach to financial services. If we truly listen to the needs of clients beyond their birth dates, we will be in a better place to develop the financial services that can help them most.

For more information on Financial Inclusion 2020, sign up for campaign updates.

Data source for figures: UNECE Statistical Database, compiled from national and international (Eurostat and UNICEF TransMONEE) official sources

Have you read?

Aging and Financial Services: With and Without Employment

First Report from FI2020′s Mapping the Invisible Market Highlights Implications for Financial Inclusion as World’s Demography Changes

Microfinance as a Tool for Active Aging