At InterMedia, the only thing we like more than conducting important research is presenting our findings – especially to those who can use our insights to advance their missions to improve people’s lives around the world. That is why I welcomed the opportunity to present findings from InterMedia’s Financial Inclusion Insights (FII) program to participants in the World Economic Forum’s recent conference in Cape Town, South Africa.
The overarching theme of the conference was celebrating the WEF’s 25 years of involvement in Africa. There is indeed much to celebrate about the continent’s economic and social progress in recent decades. Yet, the influential group of government, business and civic leaders gathered in Cape Town also recognized the gaps that persist and the challenges that lie ahead for Africa.
InterMedia’s own research on financial inclusion documents both Africa’s promising signs (namely, the overall trend toward expansion of access to basic financial services in key African countries) and the challenges that remain (including the gender gap and limited usage of services among those with access).
My remit for the Cape Town WEF conference was to focus on one of these challenges to full financial inclusion: the digitization of government to people (G2P) payments. Government is uniquely able to require that its payees receive their payments into bank accounts rather than in cash, and the magnitude of the number of G2P recipients means this digitization could move the needle on bank account usage in developing countries. As a result, G2P payments are widely recognized within the development community as having the potential to foster greater financial inclusion. But the key word here is potential: Cash remains king of G2P payments in the developing world, despite notable efforts to promote digitization.
Across the developing countries for which InterMedia has collected data on G2P payments, less than a third – in some cases, far less – of G2P recipients receive their funds into a bank account. This means that even in countries where financial inclusion is relatively more advanced (such as India and Kenya), less than a third of G2P recipients receive their payments into an account. The figure is far lower elsewhere.
InterMedia’s research indicates that G2P’s potential to promote financial inclusion is under-realized because of infrastructure and systemic challenges. Our recent study in Nigeria – where the government has made digitizing G2P a priority – many G2P recipients simply do not see how digital transfers into bank accounts are more convenient for them given the technical problems and customer service issues they experience when trying to access these accounts. Thus, many digital G2P recipients promptly cash-out the payments they receive via direct deposit rather than use the associated bank account.
This points to the need for more focus on the customer experience when developing initiatives to promote the use of bank accounts. Governments may find it convenient to deposit money into recipients’ bank accounts, but such an initiative does not foster financial inclusion unless consumers find it convenient to use these accounts.
Christopher J. Fleury is president and CEO of InterMedia.