But the newest study from the Center for Financial Inclusion at Accion and the Institute of International Finance, “The Business of Financial Inclusion: Insights from Banks in Emerging Markets”, found that of the 721 million adults who gained access to new financial accounts between 2011-2014, 90 percent of them did so at more traditional financial institutions.

Telcos and fintech start-ups have been getting the headlines; the banks have been getting the job done. That’s important, exciting news.

Insights from banking in emerging markets

This report shows that, for the first time, banks, all around the world, are seeing financial inclusion as a core business function.  The Business of Financial Inclusion report shows that banks are creating lean, viable business models to reach customers they have never reached before. Digital payments are the main gateway for commercial banks to reach underbanked customers. They take many forms – transactional accounts, salaries, bill payments, G2P, and P2P. This means cheaper, more secure, and more convenient payments. Instead of spending hours traveling to make a single utility payment, mobile money allows you to push a button.

But technology is doing more than providing customers with more channels. It’s also powering data analytics, back-office systems, and product innovation.  The combination of banking’s view of the base of the pyramid as a business opportunity, leaner business models, and back office efficiencies is how we’ll reach more people, and provide them with the tools they need to help themselves.

The Business of Financial Inclusion report also shows how highly the banks regard microfinance, as both an investment opportunity and, more importantly, as a partner in reaching the ultimate clients. These partnerships between banks and microfinance institutions are transforming financial inclusion ecosystems.

emerging markets report graph by CFI Accion

Account access versus usage

The 721 million new accounts that the world added between 2011-2014 represent tremendous progress; with banking committed to pursuing financial inclusion, I’m confident that we’ll add hundreds of millions of more new accounts in the coming years.

But opening accounts is just the first step. Too often newly-opened accounts remain dormant. Compared to high-income countries, people living in low-income countries use their accounts much less frequently — and sometimes not at all. And opening dormant accounts is not our vision of financial inclusion.

We know there is much more work to be done. And we are seeing promising signs. The State Bank of India, for example, has led a major effort to open up accounts and, in the first 18 months, we have seen the number of zero account balances fall from 90 percent to 40 percent.

Now that a host of new banks are committing themselves with this cause, they must acquaint themselves with this important distinction: access is a necessary condition for financial inclusion, but customers must use those accounts to realize the potential of inclusive finance.  To ensure that customers remain active, engaged users, we need to keep working to gain the trust of our new clients, to develop products that make sense for them and to make sure they have the capability to use these powerful tools well.

Financial inclusion: the solution to an urgent problem

Financial exclusion is an urgent problem. Providing someone with financial services now might make the difference between their children going to school today or waiting for their grandchildren — or great-grandchildren — to realize that opportunity.

And this is a problem that we can solve. The digital revolution has changed the boundaries of our imagination. And this report shows that instead of viewing financial exclusion as a failure of the banking system, we have turned a very significant corner – and now the banks have begun to see the enormous opportunity at the base of the pyramid. This is important progress.