New Global Findex data highlights the potential for digital merchant payments to deepen financial inclusion

• The World Bank has released its latest Global Findex Database, which contains updated indicators on financial services and digital payments.
• The report highlights opportunities to encourage digital payments, which are particularly relevant to small merchants in developing economies.
• COVID-19 boosted the adoption of digital financial services; the increase in adults in developing economies using digital payments outpaced the growth of account ownership between 2014 and 2021.

Last month, the World Bank published its much-anticipated Global Findex Database for 2021, which had been delayed due to COVID-19. Using survey data from almost 128,000 people across 123 countries, the report highlights the progress that has been made in financial inclusion indicators across the globe. The data explores formal financial account ownership, use of financial services, and financial well-being. While the report does not include data specifically about small business owners, it does offer valuable insights into the financial lives of people across the globe, including their use of digital merchant payments. Given that merchants are among the most common small businesses globally, these findings detail opportunities to encourage further usage that could ultimately improve small business outcomes.

Financial account ownership has increased globally.

In the decade leading up to 2021, global formal account ownership — whether through a bank or a regulated institution, such as a mobile money provider — has increased by 50%, from 51% of adults in 2011 to 76% of adults in 2021. In developing economies, 72% of adults now have an account, up from 65% in 2017. In Africa, the prevalence of digital financial services has helped increase account ownership across the region. In 11 countries — all in Africa — there are more adults with only a mobile money account than those with an account at a financial institution. Further, the gender gap in account ownership, which had been persistent in previous years, has narrowed from 9 percentage points in 2017 to 6 in 2021.

In developing economies, growth in digital payments outpaced account ownership.

The Global Findex data also shows that COVID-19 boosted the adoption of digital financial services, particularly in emerging markets. Overall, in developing economies the increase in adults making or receiving digital payments outpaced the growth of account ownership between 2014 and 2021. In 2021, 40% of adults in developing economies who made a digital merchant payment, and one-third of adults in developing economies who paid a utility bill digitally, did so for the first time after the start of the pandemic. Nearly all adults in developing economies (96%) who made a digital merchant payment did so in-store versus online. Further, receiving payment into an account (such as a wage or government payment) was a gateway to using other financial services. For instance, among adults who had received a payment to an account, 83% reported that they made a digital payment. Wage recipients, in particular, were more likely to make digital merchant payments, in addition to using their accounts to store, save, and borrow money.

The Global Findex report also highlights opportunities to encourage digital payments, which are particularly relevant to small merchants in developing economies. For instance, despite owning digital accounts, 1.6 billion adults made cash-only merchant payments in 2021. Additionally, beyond the gender gap in account ownership, the data also identifies a gender gap in using digital payments in some developing economies. For instance, in India and Sri Lanka, where there’s no gender gap in account ownership, there was a 17 and 18 percentage point gender gap in using digital payments. Women are more likely to lack identification or a mobile phone, to live far from a bank branch or agent outlet, and to need support to open and effectively use a financial account.

As discussed in a previous article, increasing the adoption of digital payments for merchants has the potential to lead to increased profitability and the adoption of other digital tools that improve small business outcomes. Here, providers should encourage and incentivize merchants to offer digital payment options, such as by bundling digital payments with value-added services to address their pain points and bring real value to their businesses. This could include features that support merchants with customer relationship management, inventory management, and business intelligence, among others. Similarly, the Global Findex report suggests that infrastructure and regulation — such as unreliable network connectivity or burdensome business formalization requirements — may make digital payments less attractive to merchants and will need to be addressed by regulators and providers.

Customers are the other side of the coin when it comes to merchant payments — communicating the benefits of digital payments and supporting them in using digital payments are equally necessary. For instance, the Global Findex data show that one-third of mobile money account holders in Africa say they could not use their mobile money account without help from a family member or agent. Increasing consumer protection, trust, and transparency with digital financial services are important elements, too.

This new data highlights progress in digital payments and financial inclusion efforts globally, but there’s still more work to do. While the proportion continues to decrease, 1.4 billion adults remain unbanked in 2021. Further, the five economies with the greatest share of unbanked adults remain unchanged since 2017: India, China, Pakistan, Indonesia, and Nigeria. For the World Bank, digitalizing cash transactions offers a proven pathway to account ownership. By accepting digital payments themselves, small merchants, particularly in developing economies, can help support financial inclusion.