Six ways to reach people shut out from formal financial systems

Michael Schlein is President and CEO of Accion, a global nonprofit working to create a fair and inclusive economy, and Sophie Sirtaine is CEO of CGAP, a partnership of more than 40 development organisations working at the frontier of inclusive finance.

The World Bank, in its recently released Global Findex 2025 database, revealed significant progress has been made towards connecting people around the world to the formal financial system.

The data shows that in low- and middle-income countries (LMICs), 75% of adults now have a bank account – an increase of 80% over the last decade.

However, the Findex database also shows that 1.3 billion people globally remain excluded and a further 8% of account owners in LMICs have only what would be considered ‘inactive’ accounts.

Many are women. They remain trapped in cash-based economies and lack access to financial services that could boost resilience.

As the world goes increasingly digital, how do we ensure no one is left behind?

Based on our organisations’ extensive work on financial inclusion, we identified six solutions that can play an important role connecting excluded groups to the digital economy.

New technology

Artificial intelligence can help drive increased financial inclusion, especially since a rise in mobile account ownership in LMICs is creating a wealth of new data on people who would otherwise have been invisible to the financial system.

Large Language Models can quickly analyse unstructured data to create alternative credit scoring systems. This helps build a credit profile for people who previously had none, removing a major barrier for lenders to offer services and reducing the risk of bias against vulnerable groups, including women.

AI can also help bundle financial services with other tools, including weather data, market price data and more, helping guide farmers on what to plant and when, to increase productivity and income.

AI is at the top, but there is a long of technologies that are allowing us to reach and serve people who have been left out in ways that are faster, cheaper, better and, most important, safer.

Digital Public Infrastructure and Open Finance

Another way to bring previously off-the-grid entrepreneurs into the formal financial system by generating data trails is through digital public infrastructure (DPI). This includes digital IDs and wallets that allow people to receive government funds, business transactions, and peer-to-peer payments quickly and seamlessly.

Open Finance is a financial innovation that incentivises businesses and other stakeholders to securely share data. Both are powerful tools for reaching people in informal, cash-based economies.

The Indian account aggregator Sahamati is an open finance example of how DPI can connect people into the digital economy by ensuring the secure transfer of consumer data to financial institutions.

Crowding in private sector capital

Many new innovations show potential but most are difficult to expand because of a lack of capital.

For example, CGAP’s research has shown that inclusive credit fintechs face considerable funding challenges; 54% do not make it past the first round of funding and only 15% complete three or more funding rounds.

In 2022, public funders and charitable foundations had $2.4 billion committed in equity to investment funds expanding financial inclusion, and $2 billion was committed to guarantees incentivising and supporting inclusive financial institutions to expand their lending to underserved populations.

Such investments have catalysed private investments but need to scale further to materially reach the most remote customers and expand the suite of financial products available.

Focus on outcomes

A focus on outcomes is essential to drive action where it can be most impactful, trigger course corrections, and ensure we reach our goals.

But first we need to understand what works and then measure it. For example, does access to mobile banking really equate to a higher standard of living? Initiatives like CGAP’s Financial Inclusion 2.0 and Impact Pathfinder aim to place greater focus on outcomes.

Targeted initiatives

Targeted initiatives are crucial for marginalised groups, especially for low-income women.

Legal rights to own assets, simplified business registration, and tailored subsidies can help women entrepreneurs join the formal economy. Gender disaggregated data remains critical for banks and policymakers to better understand women’s needs and serve them better.

Building trust through consumer protection

A recent survey found that in some LMICs, adoption rates for new digital financial tools are slow, partly because people are weary of fraud.

Entrepreneurs consistently described peers who had lost money through mobile payments, loan apps, or digital wallets. Coordinated action by regulators, financing providers, consumer advocates, market facilitators and users themselves will be critical to regaining and building trust.

We already have many of the tools and much of the expertise needed to connect underserved communities to the digital economy while protecting their interest. By ensuring tech innovation meets the needs of underserved consumers and protects their interests, we can build successful outcomes. To do this, real impact on the ground must be the focus.