Rising Incomes Offer New Opportunities for Financial Inclusion
New report reveals the opportunity to extend financial services to millions as incomes amongthe bottom 40% rise around the world
Washington, D.C. and Purchase, NY, June 11, 2013 –Today, the Center for Financial Inclusion at Accion and MasterCard released Growing Income, Growing Inclusion: How Rising Incomes at the Base of the Pyramid Will Shape Financial Inclusion. The report shows that rising incomes among the world’s poor and near-poor are creating a vast new market for financial services. These shifts highlight the next challenge on the path to financial inclusion – designing ways to successfully serve new and untraditional banking clients.
Key findings of the report include:
Incomes are rising worldwide among people at the base of the pyramid. The bottom 40 percent of the population in low- and middle-income economies now commands about $3 trillion in annual income. By 2020, that figure (in real dollars) will rise to $5.8 trillion per year.
A new income class is emerging – the "vulnerable class," which includes people with incomes in the range of $4 to $10 per day. People in this group, while not yet financially secure, have increasing disposable income and are likely to “outgrow” the informal financial services they have used in the past.
Financial services providers are starting to reach into these new markets. There are many possible "on-ramp" products to introduce people to formal financial services, but the process of transition to a broader range of products is not yet well understood.
New and vulnerable customers need special care. They remain vulnerable to fraud, scams, and over-indebtedness, so consumer protection and financial education are critical to ensuring that first experiences with financial services are positive ones.
Poverty persists globally, especially in Africa and South Asia, despite the global rise in income. Advances in technology and falling costs offer the chance to bring financial services to even poor and remote populations.
"Successfully serving this global class of new and vulnerable consumers requires adapting to their unique characteristics," said Elisabeth Rhyne, Managing Director of the Center for Financial Inclusion at Accion and a co-author of the report. "The most effective policies will allow the private sector to create new delivery systems and products while educating and protecting clients who are using formal financial services for the first time."
"The Mapping the Invisible Market initiative helps us better understand local markets, specifically the shifting demographics and rising income levels, which enable us to create innovative solutions," said Tara Nathan, Executive Director, Public Private Partnerships at MasterCard. "These insights are critical to MasterCard's engagement in developing countries like Nigeria, where we recently launched a pilot program to roll out 13 million National Identity Cards with prepayment functionality."
This is the second report in a series from Mapping the Invisible Market, a research initiative examining how shifts in demographics, income, and other factors provide an opportunity to expand access to financial services at a time when over 2.5 billion people are still excluded from the formal financial system. Mapping the Invisible Market is part of the Financial Inclusion 2020 project, which aims to promote financial inclusion worldwide thereby improving lives, unlocking opportunity, and increasing the resilience of our shared global economy.
MasterCard is also funding the Mapping the Invisible Market interactive website, which features additional research from the report including infographics and interactive data visualizations. Visitors can explore financial inclusion data, demography, economics and development by country or region, and they can create and share their own data visualizations.
MasterCard (NYSE: MA), www.mastercard.com , is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.
About the Center for Financial Inclusion at Accion
The Center for Financial Inclusion at Accion (CFI) helps bring about the conditions for achieving full financial inclusion around the world. Constructing a financial inclusion sector that reaches everyone with quality services will require the combined efforts of many actors. CFI contributes to full inclusion by collaborating with sector participants to tackle challenges beyond the scope of any one actor, using a toolkit that moves from thought leadership to action. For more information, visit www.centerforfinancialinclusion.org.
About Financial Inclusion 2020
FI2020 aims to build a movement that mobilizes stakeholders around the globe to achieve full inclusion using the year 2020 as a focal point to galvanize action. The project engages diverse players who can expand financial inclusion through two initiatives: the research initiative Mapping the Invisible Market and a Roadmap to Financial Inclusion which will be carried out through a consultative process leading to a global forum in October 2013, with the ultimate goal to advance the agenda through coordinated, effective, collaborative actions to be undertaken by global partners, both public and private. For more information, visit www.centerforfinancialinclusion.org/fi2020.
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