In recent years, the Latin America and Caribbean (LAC) region has witnessed remarkable progress in advancing financial inclusion. According to Findex 2021, account ownership in LAC saw the largest increase (18 percentage points) of any developing world region since 2017, resulting in 73% of adults with an account in 2021. The Global Microscope 2020 report emphasized that financial inclusion was key to LAC's economic response to the COVID-19 crisis, which induced a recession that ranks among the most severe in a century.
At the same time, the crisis stimulated rapid digitization, which has ushered in a new era of financial solutions globally that have the potential to bring many poor people into the formal financial sector and contribute to sustainable development. Evidence shows that inclusive digital financial services enable 13 of the Sustainable Development Goals (SDGs) and could help the world get back on track to achieve the SDGs by 2030.
Governments in LAC recognize not only the importance of advancing digital financial inclusion, but also that fostering competition among financial service providers leads to improved choices, lower costs, and high-quality services for all consumers—including those living in poverty. Instead of incumbent banks fighting for a bigger piece of the pie, the size of the entire pie gets bigger as many financially excluded and underserved low-income consumers become viable business targets.
Financial reforms over the years
Over the years, governments in LAC have undertaken numerous initiatives to forge greater financial inclusion. Postal reforms in Brazil and reforms aimed at increasing the role of non-bank financial institutions in Mexico are but a few examples. And, while these reforms have had some positive impact on financial inclusion where they were implemented, they have fallen short of fully unlocking competition among financial service providers. As a result of this, financial sectors in LAC have remained concentrated and shallow.
Many countries still grappled with large bank oligopolies that lack incentives to serve low-income clients. In fact, the financial sector across countries in LAC averaged around 30% of GDP in 2021, according to the 2021 IMF Financial Development Index, compared to around 32% across countries in Asia and the Pacific, 46% in Europe, and 66% across advanced economies.
By 2021, 60% of the unbanked in LAC said financial services were too expensive and financial institutions were too far away. So, while the breadth of financial inclusion (i.e., access to financial services) has increased, the depth (i.e., usage of financial services) hasn’t. This means financial inclusion remains shallow.
To more purposefully promote competition while addressing the challenges inherent within a region that has a large informal economy, a large rural sector, and populations dispersed over vast remote areas, governments in LAC are now pursuing a more promising strategy. They are leveraging interoperable payment systems and open finance to promote a more inclusive and competitive business environment. This approach, which increases the size of the market pie, not only holds promise for increasing the breadth and depth of financial inclusion but also its utility — i.e., enhancing the practical benefits and positive outcomes for consumers.
Two key initiatives promoting competition today
Several countries in the region have implemented instant interoperable payment reforms, which facilitate payments between providers (including new players such as fintechs and digital banks) within seconds at any time of the day or night. Early evidence suggests that this interoperability has increased the usage of low-value accounts. Brazil’s instant payment platform, PIX, has been used by more than 140 million individuals (about 80% of the adult population) in two and a half years, according to BCB statistics as of May 2023. There are now more than 3 billion transactions taking place each month.
Following the launch of PIX, the number of total bank clients grew by over 40 million in two years, according to BIS, and an estimated 50 million Brazilians made their first digital payment ever. Greater use of digital payments can provide a pathway into the digital economy, which in turn can open up additional economic opportunities and help households and small businesses manage weather shocks and invest in a green future. This is of particular importance in a region marked by income inequality and climate shocks that are becoming more acute.
While a robust payment system that is digital, interoperable, offers instant settlement, and is open to third-party payment initiation allows for greater competition among banks and non-banks, it cannot alone improve the depth of financial inclusion. Initiatives like the new pro-competition open finance framework championed by Brazil hold great promise in leveraging data to advance the reach and benefits of financial services.
By breaking down information asymmetry between customers and the longstanding over-concentration within the banking sector—which in many markets has traditionally led to higher margins and lower incentives for new market entrants— it addresses some of the most fundamental obstacles that inhibit the access and use of data in financial services.
Meanwhile, open finance gives innovators incentives to enter the market and the flexibility to adopt technologies that leverage non-traditional digital data trails to help promote financial empowerment —particularly among traditionally underserved segments, such as people living in poverty, women, and small businesses. A responsible and inclusive data ecosystem is key to allowing low-income people to benefit from their data.
Of course, in addition to interoperable payment systems, for open finance to flourish responsibly, several enabling policies need to be in place, including national IDs, tiered know-your-customer (KYC) data protection, and other consumer protection frameworks, among others.
Overall, well-designed initiatives that increase competition among financial service providers within a market and promote innovation hold great promise for increasing the depth, breadth, and utility of financial inclusion in a responsible manner. To maximize their potential, policymakers will have to balance various policy objectives, including promoting competition and innovation on the one hand and ensuring protection and stability on the other. Pro-competition initiatives in the LAC region, with Brazil at the helm, are great examples to watch.
Editor's note 02/05/24: A previous version of this blog stated an 18% increase in account ownership in LAC since 2017 - this has been corrected to indicate an 18 percentage point increase instead.
Katika miaka ya hivi karibuni, eneo la Amerika ya Kusini na Karibea (LAC) limeshuhudia maendeleo ya kushangaza katika kuendeleza ujumuishaji wa kifedha. Kulingana na FINDEX, utajiri wa akaunti katika LAC uliona ongezeko kubwa zaidi (pamoja na asilimia 18) ya mkoa wowote wa ulimwengu unaositawi tangu 2017, ikisababisha 73% ya watu wazima kuwa na akaunti mnamo 2021. Ripoti ya Global Microscope 2020 ilisisitiza kuwa ujumuishaji wa kifedha ulikuwa ufunguo wa majibu ya kiuchumi ya LAC kwa mgogoro wa COVID-19, ambao ulisababisha mfumuko wa uchumi ambao ni kati ya mbaya zaidi katika karne. Wakati huo huo, mgogoro huo ulichochea digitization ya haraka, ambayo imeanzisha enzi mpya ya suluhisho la kifedha ulimwenguni ambayo ina uwezo wa kuleta watu wengi maskini katika sekta rasmi ya kifedha na kuchangia maendeleo endelevu. """Uhakika unaonyesha kwamba huduma za kifedha za dijiti za ujumuishaji zinawezesha 13 ya Malengo ya Maendeleo Endelevu (SDGs) na zinaweza kusaidia ulimwengu kurudi kwenye njia ya kufikia SDGs ifikapo 2030." Serikali katika LAC kutambua si tu umuhimu wa kuendeleza digital fedha ujumuishaji, lakini pia kwamba kukuza ushindani kati ya watoa huduma za kifedha inaongoza kwa uchaguzi bora, gharama za chini, na huduma za ubora wa juu kwa watumiaji wote - ikiwa ni pamoja na wale wanaoishi katika umaskini. Badala ya benki zilizopo kupigana kwa kipande kikubwa cha keki, ukubwa wa keki nzima unazidi kuwa mkubwa kwani watumiaji wengi wa mapato ya chini na waliotengwa kifedha wanakuwa malengo ya biashara yanayofaa. Katika miaka ya hivi karibuni, serikali za LAC zimechukua hatua kadhaa za kuimarisha ujumuishaji wa kifedha. Marekebisho ya posta nchini Brazil na marekebisho yaliyolenga kuongeza jukumu la taasisi za kifedha zisizo za benki nchini Mexico ni mifano michache tu. Na wakati mageuzi haya yamekuwa na athari fulani nzuri kwa ujumuishaji wa kifedha ambapo yalitekelezwa, yameshindwa kufungua kabisa ushindani kati ya watoa huduma za kifedha. Matokeo yake, sekta za kifedha katika LAC zimebaki zilizokusanywa na za chini. Nchi nyingi bado zinashindana na oligopoli kubwa za benki ambazo hazina motisha ya kuwahudumia wateja wenye mapato ya chini. Sekta ya fedha katika nchi za LAC ilifikia wastani wa karibu 30% ya Pato la Taifa mnamo 2021, kulingana na Kiashiria cha Maendeleo ya Fedha cha IMF ya 2021, ikilinganishwa na karibu 32% katika nchi za Asia na Pasifiki, 46% katika Ulaya, na 66% katika uchumi wa hali ya juu. "Kwa mujibu wa ripoti hiyo, ""kufikia mwaka 2021, asilimia 60 ya watu wasio na benki katika LAC walisema huduma za kifedha zilikuwa ghali sana na taasisi za kifedha zilikuwa mbali sana.""" Kwa hiyo, wakati upana wa ujumuishaji wa kifedha (yaani, upatikanaji wa huduma za kifedha) umeongezeka, kina (yaani, matumizi ya huduma za kifedha) haijaongezeka. Hii ina maana ujumuishaji wa kifedha unabaki kuwa mdogo. Ili kuendeleza ushindani kwa njia ya makusudi zaidi wakati wa kushughulikia changamoto za ndani ya mkoa ambao una uchumi mkubwa wa kisasa, sekta kubwa ya vijijini, na idadi ya watu waliotawanyika katika maeneo makubwa ya mbali, serikali za LAC sasa zinafuata mkakati wa kuahidi zaidi. Wao ni leveraging mifumo ya malipo interoperable na fedha wazi kukuza mazingira ya biashara zaidi ya umoja na ushindani. Njia hii, ambayo huongeza ukubwa wa pie ya soko, sio tu ina ahadi ya kuongeza upana na kina cha ujumuishaji wa kifedha lakini pia matumizi yake - yaani, kuongeza faida za vitendo na matokeo mazuri kwa watumiaji. "Miongoni mwa mipango ya ""mwisho wa siku"" ni kuanzisha mfumo wa malipo ya haraka, ambayo inasaidia malipo kati ya watoa huduma (ikiwa ni pamoja na wachezaji wapya kama vile fintechs na benki za dijiti) katika sekunde chache wakati wowote wa mchana au usiku." Uthibitisho wa mapema unaonyesha kwamba ushirikiano huu umeongeza matumizi ya akaunti za thamani ya chini. PIX, jukwaa la malipo ya haraka la Brazil, limetumiwa na watu zaidi ya milioni 140 (karibu 80% ya idadi ya watu wazima) katika miaka miwili na nusu, kulingana na takwimu za BCB mnamo Mei 2023. Sasa kuna zaidi ya shughuli bilioni 3 zinazofanyika kila mwezi. Baada ya kuanzishwa kwa PIX, idadi ya wateja wa benki iliongezeka kwa zaidi ya milioni 40 katika miaka miwili, kulingana na BIS, na takriban Wabrazili milioni 50 walifanya malipo yao ya kwanza ya dijiti. """Utekelezaji mkubwa wa malipo ya dijiti unaweza kutoa njia ya uchumi wa dijiti, ambayo kwa upande wake inaweza kufungua fursa za ziada za kiuchumi na kusaidia kaya na biashara ndogo kusimamia mshtuko wa hali ya hewa na kuwekeza katika siku zijazo za kijani." Hii ni muhimu hasa katika mkoa unaojulikana na usawa wa mapato na mshtuko wa hali ya hewa ambao unazidi kuwa mkali. "Wakati mfumo wa malipo imara ambayo ni digital, interoperable, inatoa kusuluhisha mara moja, na ni wazi kwa tatu-party malipo kuanzisha, inaruhusu ushindani mkubwa kati ya benki na yasiyo ya benki, haiwezi peke yake kuboresha kina cha ujumuishaji wa kifedha. """ "Mipango kama vile mfumo mpya wa fedha wa ushindani ulioanzishwa na Brazil ina ahadi kubwa katika kutumia data ili kuendeleza ufikiaji na faida za huduma za kifedha. """ Kwa kuvunja asymmetry ya habari kati ya wateja na mkusanyiko wa muda mrefu ndani ya sekta ya benki - ambayo katika masoko mengi imesababisha kawaida kwa faida ya juu na vichocheo vya chini kwa waingiliaji wapya wa soko - inashughulikia baadhi ya vikwazo vya msingi vinavyozuia upatikanaji na matumizi ya data katika huduma za kifedha. Wakati huo huo, fedha wazi hutoa wavumbuzi motisha ya kuingia soko na kubadilika kupitisha teknolojia ambazo hutegemeza njia zisizo za jadi za data za dijiti kusaidia kukuza nguvu za kifedha - haswa kati ya sehemu za jadi zisizo na huduma, kama vile watu wanaoishi katika umaskini, wanawake, na biashara ndogo ndogo. Mfumo wa mazingira wa data wenye uwajibikaji na wa kujumuisha ni muhimu ili kuruhusu watu wenye mapato ya chini kufaidika na data zao. "Kwa kweli, pamoja na mifumo ya malipo inayoweza kuendana, kwa fedha wazi kusitawi kwa uwajibikaji, sera kadhaa za kuwezesha zinahitaji kuwa mahali, pamoja na vitambulisho vya kitaifa, ulinzi wa data ya ""jue mteja wako"" (KYC) na mifumo mingine ya ulinzi wa watumiaji, kati ya mengine." Kwa ujumla, mipango iliyoundwa vizuri ambayo huongeza ushindani kati ya watoa huduma za kifedha ndani ya soko na kukuza uvumbuzi huwa na ahadi kubwa ya kuongeza kina, upana, na faida ya ujumuishaji wa kifedha kwa njia ya uwajibikaji. Ili kuongeza uwezo wao, watengenezaji wa sera watalazimika kusawazisha malengo mbalimbali ya sera, ikiwa ni pamoja na kukuza ushindani na uvumbuzi kwa upande mmoja na kuhakikisha ulinzi na utulivu kwa upande mwingine. Mipango ya ushindani katika eneo la LAC, na Brazil katika uongozi, ni mifano kubwa ya kuangalia. "Kumbuka: ""Toleo la awali la blogi hii lilionyesha ongezeko la 18% la umiliki wa akaunti katika LAC tangu 2017 - hii imerekebishwa kuonyesha ongezeko la asilimia 18 badala yake."