Text message alerts and increasing the use of digital payroll are two of the policy recommendations made in a new report on how digital financial technologies can help governments worldwide to serve their ageing populations.
Globally, the number of people aged 60 years or over has more than doubled since 1980. And as digital technologies become more central to accessing financial and public services, the risk is that older people – who are typically less comfortable with digital tech – suffer greater financial exclusion. A new paper, published this month by the World Bank and Better Than Cash Alliance, brings together ideas for how public servants can help older people to stay plugged into today’s fast-evolving banking and fintech services.
The paper follows the publication of the ‘G20 Fukuoka Policy Priorities on Aging and Financial Inclusion’ by the Global Partnership for Financial Inclusion (GPFI) and the OECD for the Japanese G20 Presidency. This identified eight policy priorities in the context of aging populations, which include boosting digital and financial literacy; creating products and services tailored to the range of needs of older adults; and protecting older adults from financial abuse and fraud.
The oldest tricks
On this latter point the report, ‘The Role of Digital Financial Inclusion in Preparing for Older Age and Retirement’, says that “financial exploitation is one of the most common forms of elder abuse, and vigorous consumer protections are needed to ensure that digital financial services benefit the elderly”.
Its three overarching conclusions are that a lack of pensions and savings among large proportions of adult populations presents a ‘significant challenge’ in many countries; that digital financial services can help people to prepare better for the financial challenges of old age; and that financial services present risks for older adults, but these “can be avoided or significantly reduced”.
The paper goes on to outline specific initiatives that have helped to address the challenge, while noting that some would not reach people who do not have a mobile phone. The report says, for example, that for countries with high “mobile money” penetration – such as Kenya and Ghana – regularly scheduled transfers from mobile accounts into interest-bearing savings accounts at financial institutions might offer long-term savings possibilities.
Pension payments by default
The paper also says that boosting the use of ‘digital payroll’ could give working adults more opportunities to participate in savings programmes to help in old age. It suggests that one option is for employers to automatically enroll people in retirement savings programmes “linked to digital pay-check deductions”, with the choice of opting out. Research in the United States cited in the paper has found that automatic enrollment can boost participation in company-provided pension plans by up to 67% compared with voluntary arrangements, and the UK has had a similar experience following its introduction of automatic enrolment.
On a different note, the report cites research that shows that what it terms ‘nudges’ – for example, sending reminders to make savings deposits – have been effective. It says that in the Philippines, sending text messages to remind individuals of their savings goals has increased savings amounts. Meanwhile, early results from ongoing research in Colombia suggest that text messages can help informal-sector workers to increase retirement savings.
Cash in many hands
There are fundamental challenges globally, with 230m private-sector workers around the world lacking bank accounts and receiving wages in cash. An estimated 180m of these do, however, have mobile phones, which could provide convenient and affordable access to digital financial services. Again, the report recommends that increasing the use of digital payroll could help these workers to open their first account, and therefore create possibilities for them to enroll in automated retirement savings contributions.
The Better Than Cash Alliance is a partnership of governments, companies, and international organisations whose mission is to catalyse a global movement from cash to digital payments to help achieve the Sustainable Development Goals. Based at the United Nations, it has more than 70 members including national governments from Africa, Asia-Pacific and Latin America.