McKinsey Explainers
What is financial
inclusion?
Financial inclusion is when everyone can access financial services
that can help them build wealth, including savings, credit, loans,
equity, and insurance.
August 2023
Would you be able to buy a car or a house
without taking out a loan? Most of us wouldn’t.
What about paying for emergency healthcare
without insurance? Same story. For those who don’t
have access to financial services, it’s almost
impossible to save enough to pay the bills, much
less build the kind of wealth that can be passed on
to the next generation.
Financial inclusion is a major issue around the
world. Nearly a billion and a half people living in
emerging economies don’t have access to formal
savings and credit. They pay for everything in cash,
have no secure way to save and invest their money,
and rely on informal lenders and personal networks
for credit. And just because the United States is
one of the world’s wealthiest countries doesn’t
mean the situation is any better there. A recent
McKinsey survey of 25,000 Americans found that
only half would be able to cover expenses for more
than two months if they lost their job. What’s more,
millions of Americans are underbanked—that
means you have a bank account, but to manage
your finances, you still rely on things such as money
orders, check-cashing services, and payday loans,
which are relatively expensive to use compared with
credit cards or traditional loans.
But, while the overall global wealth and income gap
has narrowed since the 1980s, inequality has
actually increased within advanced economies.
The difference between financial inclusion and
exclusion in the United States frequently comes
down to race (although rural, immigrant, LGBTQ+,
and less-educated communities also tend to be
underbanked). Black communities, in particular,
have been the targets of exclusionary financial
practices and strategies for generations, including
limited access to federal mortgage lending,
imposed geographic barriers such as redlining, and
the absence of physical bank branches in Blackmajority communities. As of 2016, the average Black
American family had only about one-tenth the
wealth of the average White American family. This is
a symptom of the racial wealth gap but also a
cause: without access to financial services, it’s
difficult to turn income into wealth.
That’s because financial inclusion is more than just
the ability to open a bank account, make a payment,
or get a loan. It’s also a means to an end. Financial
inclusion can bridge the divide between economic
opportunity and economic achievement. Our
current moment presents a meaningful opportunity
to counteract centuries of marginalization—and
create opportunities for overall economic growth.
Read on to learn more about what financial
inclusion means and why it matters.
Learn more about McKinsey’s Financial
Services Practice.
How can mobile providers help
increase financial inclusion globally?
There’s a huge opportunity for mobile providers
(particularly in emerging markets) to improve
financial inclusion for the billions of unbanked
people, as well as to create immense value by
tapping into a huge and largely untouched market.
In 2018, McKinsey projected that digital finance had
the potential to reach more than 1.6 billion new
retail customers in emerging economies, and to
increase the volume of loans extended to
individuals and businesses by $2.1 trillion. At the
time, McKinsey projected that the providers of
these products stood to increase their balance
sheets by up to a total of $4.2 trillion. While this
was several years ago, a significant opportunity
remains: according to the World Bank’s 2021 Global
Findex report, up to 38 percent of adults in
developing countries remain unbanked.
What is financial inclusion?
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But an untapped market of this size is a landscape
of unknowns. To help understand how digitalpayments providers can capture opportunities and
improve financial inclusion, in 2018 McKinsey
analyzed proprietary and publicly available data
from East Africa, West Africa, and Southeast Asia.
The findings were clear: while there was great
opportunity, providers needed to invest
significantly, for the long term, in new kinds of
partnerships. Ultimately, we determined,
profitability relied on scale—but to achieve the
scale necessary to break even, we estimated that
providers would have needed to spend enough to
see $2 billion or even $3 billion in annual
transaction value. Such scale would have required
significant and long-term IT spending, as well as
personnel and real estate costs.
— Increased access to financial services. Open
data sharing can enable customers to buy
and use financial services they might not be
able to otherwise access. For example, limited
data in some markets might disqualify
customers from accessing loans. Open data
can help assess the creditworthiness of
potential borrowers by sourcing rent, phone,
and utility bill payment history.
Learn more about McKinsey’s Financial
Services Practice.
— Improved product options. An open-data
system could make it easier to switch accounts
from one institution for another, helping
customers get the best yield.
What is open financial data and how
can it improve global financial
inclusion?
Open financial data is a critical enabler of financial
inclusion. The phrase “open financial data” refers to
the ability to share financial data through a digital
ecosystem in a way that requires limited effort or
manual intervention. A 2021 McKinsey Global
Institute analysis found that broad adoption of
open-data systems could confer up to a 1.5 percent
gain in GDP by 2030 in the United Kingdom,
European Union, and the United States, and as
much as 5 percent in India.
Open financial data can create economic value by
benefiting financial institutions, individuals, and
small and midsize enterprise customers. For
consumers, benefits include the following:
— Greater user convenience. Data sharing can
save time for customers in their interactions
with financial-service providers. For instance,
open access to data on available mortgage
products can allow customers to apply
for loans without needing to go through
mortgage brokers.
Open-data initiatives are increasingly common
globally. These include the UK’s Open
Banking Implementation Entity, the EU’s second
Payment Services Directive, Australia’s new
consumer protection laws, Brazil’s drafting of opendata guidelines, and Nigeria’s new Open
Technology Foundation (Open Banking Nigeria).
What role can financial institutions
play in closing the US racial
wealth gap?
The racial gap in the United States has persisted
for decades. The median Black family has about
13 percent of the wealth of the median White
family, and nearly half of Black households are
underbanked. Black Americans are also more likely
to be served subprime financial products, such as
What is financial inclusion?
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loans with higher interest rates that increase
over time, which can be harder to pay off than
regular loans.
The financial-services sector has a critical role to
play in addressing these disparities. In 2022,
McKinsey convened leaders across the ecosystem
to discuss how the industry can improve its service
to Black communities.
Learn more about McKinsey’s Financial Services
Practice.
How would greater financial inclusion
benefit the US economy?
Increased inclusion of Black Americans in the
financial system would benefit the entire economy:
Black families with better access to financial
services would have more opportunity to reinvest
and grow their wealth, and thereby support
increased economic activity. The McKinsey Institute
for Black Economic Mobility estimates that
addressing the racial wealth gap could lead to an
additional 5 percent of GDP growth in the
United States.
Leaving aside the moral imperative for financial
inclusion, greater inclusion of Black Americans in
the financial system would create opportunities for
financial-services companies. If Black Americans
had the same access to financial products as White
Americans, financial institutions could realize up to
approximately $2 billion in incremental, additional
revenue. Further, if Black Americans and White
Americans achieve full wealth parity, financialservices companies could realize up to $60 billion
in additional revenue from Black customers
every year.
What are five key aspects of financial
inclusion for Black Americans?
In the United States, nearly half of Black
households are unbanked or underbanked. Here
are five key aspects that denote full financial
inclusion, along with why achieving them is a
struggle for many Black Americans:
1. Be able to make everyday transactions
through a safe and affordable transaction
account. Even seemingly mundane financial
actions, such as depositing or accessing
monthly paychecks, are significantly more
costly for the average Black American
family. Many Black Americans rely on
check-cashing services due to a lack of
bank storefronts in majority Black or Brown
neighborhoods. These typically charge a fee
of about 3 percent. What’s more, Black
American families pay on average $40 per
month in bank fees and penalties—for using
ATMs or falling under the minimumrequired balance.
2.
Have access to credit. Lack of access to credit
has far-reaching consequences for many
Black Americans. For example, car
ownership is essential for many Americans
to hold down a job. But owning a car is
more expensive for Black Americans.
Research shows that Black and Brown car
shoppers who are more qualified than their
White counterparts are 62.5 percent more
likely to be offered a costlier pricing option.
And Black Americans are twice as likely
to be denied credit compared with
White Americans.
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3. Hold insurance against risk. There are huge
disparities in the types of insurance products
available to Black and White Americans.
Whereas 73 percent of White families have
private health insurance, only 57 percent of
Black families can say the same.
Learn more about McKinsey’s Public Sector
Practice—and check out job opportunities related
to financial inclusion if you’re interested in working
at McKinsey.
4. Be able to save for big goals or rainy days.
A cushion of readily available liquid assets lets
families pay for college, save for retirement, or
deal with unexpected financial events. Black
families are less likely to have such a cushion:
the average White family has 31 days of liquid
savings on hand, whereas the average Black
— “The role of financial services in improving racial
equity in the US,” July 8, 2022, JP Julien,
Munya Muvezwa, and Tawanda Sibanda
family has only five.
5. Ultimately accumulate long-term wealth.
Buying a home is typically a key step in building
family wealth. Homes appreciate in value over
time, add to net worth, and become a key
asset to pass down to future generations. But
for Black Americans, homeownership is a
much harder goal to achieve. Black Americans
are denied loans at more than double the rate
of White Americans (28 versus 11 percent).
And they are offered higher-cost loans
compared with White borrowers with similar
credit scores.
These different financial experiences have
compounding effects. Just 8 percent of Black
families leave inheritances to their children,
compared with 26 percent of White families.
Articles referenced:
— “Financial inclusion and sustainable, inclusive
growth in action,” May 19, 2022, André Dua
— “Future of Asia: The future of financial services,”
October 21, 2021, Jonathan Woetzel, Renny
Thomas, Sonia Barquin, and Tiago Devesa
— “Financial data unbound: The value of open
data for individuals and institutions,” June 24,
2021, Olivia White, Anu Madgavkar, Zac
Townsend, James Manyika, Tunde Olanrewaju,
Tawanda Sibanda, and Scott Kaufman
— “The case for accelerating financial inclusion in
Black communities,” February 25, 2020, Aria
Florant, JP Julien, Shelley Stewart, Nina Yancy,
and Jason Wright
— “Inequality: A persisting challenge and its
implications,” June 26, 2019, David Fine, James
Manyika, Pal Erik Sjatil, Karim Tadjeddine,
Tilman Tacke, and Maggie Desmond
— “Mobile money in emerging markets: The
business case for financial inclusion,” March 12,
2018, Philip Osafo-Kwaako, Marc Singer, Olivia
White, and Yassir Zouauoi
— “Global Financial Inclusion,” Fall 2010, Jonathan
Bays, Alberto Chaia, Tony Goland, and
Robert Schiff
Copyright © 2023 McKinsey & Company. All rights reserved.
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