While many digital savings accounts constitute digital channels to legacy savings accounts at banking institutions, many others, such as M-Shwari in Kenya, M-Pawa in Tanzania, and MoKash in Uganda, are new accounts developed for digital savings. Moreover, new classes of institutions have emerged, such as India’s payments banks, which offer dedicated digital savings accounts. Though the report focuses on digital savings accounts, it also takes stock of alternative non-deposit digital savings products that enhance consumer choice, such as e-wallets offering customers a financial return and digitally-accessible pension products.
Digital technologies and innovation help enhance access to savings accounts
The report finds that digital technology and innovative business models enable three broad product and market properties that enhance savings account accessibility:
- Value chain disaggregation, which occurs when banking institutions partner with nonbanks for the technology and distribution aspects of digital savings accounts, allows for expanded access points, improvements in the economics of low-cost savings accounts, leveraging of different entities’ comparative advantages, and scaling up of microbanking institutions.
- Product tailoring and customization is made easier through digital technology and innovative business models, enabling providers to incorporate greater degrees of accessibility, flexibility, and affordability in their savings account offerings.
- Leveraging of existing DFS ecosystems helps foster competition in the savings product space and facilitates access through use of existing infrastructure.
Policies and digital savings market development
Finally, the report discusses key policy issues that enable and constrain digital savings market development and offers policy considerations within the context of the G20’s High-Level Principles (HLPs) for Digital Financial Inclusion.
Based on current market observations, three policy considerations seem most important for facilitating digital savings account deployments:
- Enable banking institutions to pursue digital savings partnerships with nonbank entities.
- Support the development of interoperability between banks and nonbank e-money issuers.
- Harmonize customer due diligence standards for e-money wallets and low-risk bank deposits.
Digital savings represents a relatively new area of inquiry for digital financial inclusion research. The report largely focuses on supply-side factors in the digital savings market. As products mature and more data become available, researchers will be able to evaluate questions that bring together supply and demand side factors, thus developing a clearer picture of what works best in the digital savings market. The report concludes with a series of future research questions meant to elucidate key outstanding issues. These focus on the digital savings product attributes that drive responsible uptake and usage, as well as product economics and competition. Policymakers should consider these future research topics in concert with the policy considerations discussed in the report.
This report was produced as part of the Financial Inclusion Support Framework’s (FISF) Global Knowledge and Convening; FISF is a WBG initiative generously supported by the Netherlands Ministry of Foreign Affairs and the Bill & Melinda Gates Foundation.