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What Does Financial Inclusion Mean?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedNov 20222 min read

While many individuals hold multiple bank accounts, credit cards, and loans in our names, not everyone has equal access to these everyday financial services. In fact, the World Bank estimates that roughly 1.7 billion adults worldwide don’t have access to any type of financial services at all. Financial inclusion offers a series of strategies to make banking more open to everyone. So, what is financial inclusion exactly, and why is it important? We’ll cover how it works below.

What is financial inclusion?

The financial inclusion meaning is simply the idea that banking services should be available to everyone. This term describes the goal that all businesses and individuals deserve to have equal opportunity to affordable financial services and products. These include things like bank accounts, savings accounts, credit services, and insurance products. The first step to financial inclusion is access to a basic transaction account. At the fundamental level, this allows individuals to store, send, and receive payments.

With access to a basic account, people can then use it as a stepping stone to save and access additional services like credit and insurance products. They can also generate funding for new businesses, make investments, and save for the future. With the growth of digital finance and banking apps, it’s now possible to reach underserved regions and emerging markets. Economies that used to be primarily cash-based are now moving towards digital financial inclusion.

Why is financial inclusion important?

Financial inclusion lifts economies worldwide by allowing underserved populations to engage in transactions and save money. It’s important as a first step towards growth, uplifting those living in poverty.

Although it’s often associated with developing economies, the COVID-19 pandemic has also accelerated a greater need for financial inclusion services within the UK. According to a Deloitte report, 45% of UK banking customers report a negative toll on their wellbeing due to financial issues. Higher interest rates, inflation, and stricter lending criteria are making it more difficult for many consumers to obtain the financing they need.

Financial inclusion examples

So, how are today’s financial institutions putting financial inclusion to use? One example would be Santander Bank’s trio of financial inclusion services. Its Superdigital platform enables cash deposits, payments, and withdrawals on the back of growing smartphone use in Latin America. At the same time, it offers the Prospera microfinance programme in Brazil, as well as Tuiio microloans for low-income households in Mexico.

The World Bank is performing extensive work on financial inclusion in multiple areas, supporting development, digital finance, and small businesses. Examples of its work include initiatives like the Digital Economy for Africa and Women Entrepreneurs Finance, removing barriers for small business owners.

Financial inclusion strategies

Fintech services and tools like open banking can help boost inclusion and prevent customers being left behind. Here are a few additional financial inclusion strategies being used by fintech companies and banks:

Peer-to-peer lending platforms cater to individuals who might not be eligible for traditional loans, particularly due to lack of a credit history.
Microlending serves a similar purpose, offering capital to small businesses in emerging markets that wouldn’t otherwise access business loans.
Crowdfunding platforms let entrepreneurs generate cash to pay for their ideas, product development, events, or non-profit projects.
Cashless transactions let customers make payments without opening a traditional bank account.
AI-driven financial advisors offer customised services at lower cost than an in-person consultant.

Upgrading payment systems is a final strategy to consider as part of financial inclusion. Governments are promoting the use of electronic rather than cash-based payments to lower processing costs and reduce fraud. Platforms like GoCardless are helping change the payments landscape with digital services, including our open banking-powered Instant Bank Pay and direct debit solutions. It’s quick and easy for even the smallest business to set up, with transparent pricing to cut costs.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.