Equitable use of financial services: An insurance policy prerogative
Fair and equitable use of financial services is really a prerequisite for economic security and success. It may improve individuals’ employment outcomes, wealth accumulation, and tendency to begin a company. Yet, women around the globe remain unbanked or underbanked (Demirgüc-Kunt et al. 2017). Hopes are high that new financial technology – or “fintech” – can enhance financial inclusion and lastly close the gender gap in use of financial services.
But does fintech assistance to close the gender gap? To discover, we checked out 27,000 adults in 28 major economies (Chen et al. 2021), who shared their utilization of and attitudes toward fintech services and products supplied by fintech entrants and traditional banking institutions. The sample is representative across the gender and age distributions and possesses detailed web sites the respondents.
The fintech gender gap
Our findings claim that fintech isn’t (yet) making good on its promise: there’s a big “fintech gender gap.” While 29% of males within the survey use fintech, only 21% of ladies do – a niche of 8 percentage points (pp). The space exists in just about all countries within our sample (graph 1). Individual characteristics, for example age, earnings, education, marital or employment status, or perhaps a proxy for financial literacy only explain 30% from the gap, and country-specific characteristics only 8%. Quite simply, even among individuals of comparable age or earnings residing in exactly the same country, women use fintech by around 5 pp under men.
A scatter chart (diamonds and circles) showing Graph 1: Women use fintech under men in virtually every country studied
Source: Chen et al. (2021).
So how exactly does the fintech gender gap match up against the space in banking account possession? Demirgüc-Kunt et al. (2018) are convinced that 72% of males and 65% of ladies possess a banking account globally. The unconditional gap in banking account possession (7 pp) is thus smaller sized compared to fintech gender gap (8 pp). Scaled by average adoption rates, at 69% for traditional accounts and 25% for fintech, the main difference is even starker: 10% versus 32%. These bits of information claim that fintech entrants have to date not closed the gender gap in use of financial services.
What explains the space?
Will it matter who offers fintech products? Within our sample, 49% from the respondents use novel financial services and products that exist by traditional banking institutions, in contrast to 25% for fintech entrants. Still, men are more inclined to use fintech products regardless of the company. The gender gap averages 8 pp (32% from the average adoption rate) among services supplied by entrants and 9 pp (18%) among individuals supplied by incumbents (graph 2). The main difference across providers is statistically minor, which means the gender gap isn’t affected by who provides fintech services or products, but instead these products themselves.
Graph 2: The fintech gender gap is comparable among traditional banking institutions and entrants
A bar chart showing Graph 2: The fintech gender gap is comparable among traditional banking institutions and entrants
Source: Chen et al. (2021).
These fintech products, however, differ greatly in scope. For instance, some products have a tendency to complement existing financial services, for example online budgeting and financial planning tools or aggregators, while some have a tendency to replacement for these, for example peer-to-peer payments or digital-only branchless banking. Whenever we examine variations in the respondent-product level for 19 narrowly defined product groups, we discover the gender gap is about 50% smaller sized for items that complement existing services compared to substitutes. Yet, it’s gift for both kinds of fintech products.
To check on whether traditional gender roles cause men to create more financial decisions and result in greater adoption rates, we checked out single adult households. There we discovered that female-brought households remained as less inclined to use fintech than male-brought households. This result shows that arguments that attempt to tie the space to traditional gender roles within households are unsuccessful.
However, gender variations in attitudes toward privacy and technology could explain the space. Within the survey, women report being less prepared to adopt new applications, for example digital banks, and they’re less prepared to share their private data for cheaper offers or lower rates. And most men, women are convinced that they be worried about their security when confronted with companies online. Comprising these variations in attitudes cuts down on the gender gap considerably, close to 2.2 pp.
Policy support for equal access
What determines the variations during these attitudes remains a wide open question. They may be described by variations in preferences across genders, for instance, in risk aversion (Croson and Gneezy 2009), or variations within the costs and benefits that customers affix to using these new items. The variations may also derive from gender-based discrimination, for instance, if ladies have had bad previous encounters with banking institutions (Brock and De Haas 2021). Finally, the space and variations in attitudes could arise from social norms or laws and regulations affecting the price-benefit trade-off differently across genders (Hyland et al. 2020). As factors associated with attitudes toward technology and cost sensitivity explain a big area of the overall gap, future research concentrating on the determinants of those factors might be particularly promising to understand the fintech gender gap.
Do you know the implications for public policy that aims to promote financial inclusion? Financial technology alone most likely cannot close the gender gap in use of financial services. Rather, the fintech revolution may require the support of targeted policy initiatives. These must consider variations in attitudes by gender and encourage innovation that matches the requirements of all.
The style of these policies is determined by the reason for the gender gap. If variations in adoption rates derive from variations in individual preferences, then your scope for interventions might be limited. If the gap be caused by discrimination or social norms and laws and regulations that disadvantage women, then policy that addresses and remedies these 4 elements may help to advertise financial inclusion through innovation and education. Further research might help us to know what causes the fintech gender gap and inform the right policies.
Brock, J. Michelle and Rob De Haas (2021), “Discriminatory lending: Evidence from bankers within the lab”, Working Paper.
Chen, Sharon, Sebastian Doerr, Jon Frost, Leonardo Gambacorta and Hyun Song Shin (2021), “The fintech gender gap”, BIS Working Paper no 931, March.
Croson, Rachel and Uri Gneezy (2009), “Gender di?erences in preferences”, Journal of monetary Literature, vol 47, 2, pp 448-74.
Demirgüç-Kunt, Asli, Leora Klapper, and Dorothe Singer (2017), “Financial inclusion and inclusive growth: Overview of recent empirical evidence”, The Planet Bank.
Demirgüç-Kunt, Asli, Leora Klapper, Dorothe Singer, Saniya Ansar, and Mike Hess (2018), “The Global Findex Database 2017: Calculating ?nancial inclusion and also the ?ntech revolution”, The Planet Bank.
Hyland, Marie, Simeon Djankov, and Pinelopi K. Goldberg (2020), “Gendered laws and regulations and ladies within the workforce”, American Economic Review: Insights, vol 2, no 4, pp 475-90.