Bridging the digital divide: committing to an equitable digital economy on International Women's Day
March 8, 2023 l By Diana Zamora and Marcela Carrasco
The hurdles to equality in the digital economy are high. Globally, 74% of women have an account with a financial institution compared to 78% of men. However, these numbers are more unbalanced in developing countries where the majority of unbanked persons live. For example, 49% of women in Sub-Saharan Africa have an account, compared to 61% of men.
According to the World Bank, receiving payments into an account is a catalyst to save, borrow and store money. That is why bridging this digital divide is so crucial to advance women’s equality. In other words, receiving a wage, remittance, or subsidy through digital means is a gateway into the financial system.
This entry into the digital economy disproportionately impacts women, who participate at a higher rate in sectors where wages are largely paid in cash. Women also remain subject to unwritten social norms that dictate who in a household should receive a wage and who should undertake childcare and unpaid housework.
These structural differences still exist, but we are making progress in bridging this digital divide.
International Women’s Day marks a pause to think about how financial systems enable women to leverage technology in their favor. However, the challenge is so large, so complex at times, that it will only be through close collaboration between the public and private sectors, that we will be able to achieve parity in financial inclusion.
A gender-lens increases profitability for all
We’ve seen that partnerships with a gender lens can improve equity. In Mastercard’s market analysis for Banco Pichincha, Ecuador’s largest private financial institution, we dived deep into market data and product offerings to improve equity for women-owned micro, small, and medium businesses (WMSMEs). And, as our paper Gender Data that Matters, published in collaboration with the Financial Alliance for Women, shows, a more inclusive approach leads to greater profitability for financial institutions – $10 million in additional annual profit, in this case.
As a global leader in the provision of financial services for women, Banco Pichincha wanted insight into how WMSMEs interacted with its products and services. The bank recognized that better serving this group could create opportunities for increasing its product usage. It set out to identify reasons behind the gender credit gap, and why WMSMEs in Ecuador failed at a rate 28% higher than men. Uncovering the challenges facing WMSMEs led to strategies to better tailor products and improve processes, communication, and credit algorithms. This case offers insights into how other institutions can move forward in bridging this digital divide. It also highlights areas where public policy is needed to spur greater progress.
Dated legacy models stifle progress
There are many uphill battles facing gender equity, but one that can be readily changed is dated legacy processes. Studies within Latin America, for example, have identified gender bias in interest rates. A 2021 report from Colombia’s Central Bank found that male customers were consistently charged lower rates than women, even though male customers had higher profile risks. The findings hold true across five years of credit bureau data on microcredit, mortgages, and other consumer loan products.
We’ve seen how this disenfranchisement impacts women of every background. In fact, I faced it when I reached out to a bank to see if I could benefit from the record-low interest rates in refinancing my home in Mexico. When the reply came back, with a rate notably higher than the advertised, I was informed that I wasn’t eligible for the lowest rate because I had not applied with a spouse.
If advanced education, a stable job with an international firm, and a long financial history can be so easily swept aside in favor of emphasizing marital status, what does this mean for women who carry less privilege? What does this mean for the millions of women around the world who participate outside the digital economy?
In a world where women own less than 20% of land, it might be understandable why banks continue to make a male mortgage cosigner a necessity. Except we also live in a world where data demonstrates that women have stronger mortgage payment performance than men. By continuing to look at a small piece of the bigger picture, financial institutions are missing an opportunity to drive equity while expanding market share. How many women would choose to save, have a mortgage, or make an electronic payment if systems were more equitable? Isn’t it time we found out?
Lack of data obscures opportunities
Bridging the digital divide begins with access to data. However, data around women’s banking needs and behaviors are harder to come by for women disproportionately operating in a cash-based economy. The OECD indicates that less than half of Mexican women of working age participate in the paid labor market, significantly lower than the rate for Mexican men (82%). This difference may be explained by gender roles, as many women report they “do not work”, where in truth they work unpaid labor as caregivers and household administrators. However, when wages deposited in an account are the simplest way to create a digital footprint, the data will be skewed toward digital wage earners. This has led to processes that make it more difficult for women to achieve their financial goals, creating a vicious cycle.
Getting to equity requires a strategy and the will to drive change. One of the main areas where we see advancement in public policy is that more and more financial regulators are mandating data reports, identified by gender. This is key, as the very first step to closing the gap is having data to measure it.
Let’s move forward together
Policy change must balance financial institutions’ profitability with equity progress. It’s a big challenge and one that can’t be solved by either the private or public sector alone, banks or fintechs alone. Progress in financial inclusion requires collaboration between policymakers and private sector providers that can give access to data and evidence on what works and what needs to change.
Through our connection with payments ecosystems across the world, Mastercard has unique visibility into data and financial inclusion best practices. When we partner with FinTechs, banks, and digital players, we can transfer knowledge gained globally to improve local best practices. We applaud banks like Banco Pichincha for their work in understanding this issue, but believe far greater progress could be made with data-informed public policies that aim to close these gaps. Collaboration between institutions and policymakers can amplify these advantages in a more impactful way. Together, we can close the digital divide.
Learn more about how market and portfolio analytics on women enterprises are helping banks uncover new business opportunities in our brief, Gender Data that Matters, published in collaboration with the Financial Alliance for Women.