Bringing banking to the masses, one phone at a time
AbstractMore than half of the world’s adult population lacks access to formal financial services. The proportion is greater in developing countries, where 64 percent on average do not have bank accounts, compared with 17 percent in developed nations (Chart 1). Mobile communications technology is fast becoming a conduit of change. Cell phone subscriptions have mushroomed to cover 75 percent of the global population, enabling mobile banking networks to sprout and reach the unbanked, disproportionately in developing nations. ; Access to financial services is considered essential for wealth creation. A banking relationship, for example, can improve living standards and alleviate poverty by lifting consumers’ purchasing power. It can also benefit consumers through increased security and reduced costs for financial goods and services. Greater access to credit helps small businesses by providing a funding alternative to personal wealth or internal resources. ; In developing regions, formal financial institutions often rely on brick-and-mortar branches that are geographically concentrated in high-income areas such as urban centers. Distance to banks and their limited hours of operation discourage many in poor areas from opening accounts. Moreover, poor households may be unable to afford bank fees or meet minimum-balance requirements. They also may distrust financial institutions. A lack of appropriate products and services for enterprises that are small or in informal economic sectors further hinders inclusion. As a result, large population segments operate exclusively on a cash basis, outside the formal banking system. ; Mobile technology is making possible development of advanced financial systems capable of channeling funds to their most productive use.
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Bibliographic InfoArticle provided by Federal Reserve Bank of Dallas in its journal Economic Letter.
Volume (Year): 7 (2012)
Issue (Month): oct ()
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