- Individuals with limited access to traditional banks spend precious money managing their financial lives.
- PayPal believes making the financial system more open and inclusive will give people control over their financial health, benefiting both individuals and communities.
- PayPal is committed to pursuing innovation, making investments, cultivating partnerships and distributing thought leadership to improve financial health. It’s part of our business model.
Digital financial services could result in 95 million new jobs, inclusion of 1.6 billion more people in financial system, and a $3.7 trillion boost to GDP by 2025.
The Financial System Should be Open, Accessible and Inclusive
- The World Bank estimates that 2 billion adults (38% of adults in the world) are unbanked, but significantly more people than that are under-banked and underserved by the financial system. [link] In the US alone, financially underserved consumers spent $145 billion in 2015 to manage their financial lives (up from $138 billion the year before).
- PayPal believes in an open, accessible and inclusive financial system where everyone can participate and have full control over their financial health. We’re committed to democratizing financial services so that everyone can have access to the affordable, convenient and safe financial services they need to have full agency and authority over their financial health. We need to look beyond the traditional notion of creating access to financial services and break down the barriers that prevent people from fully participating – and thriving – in the global economy. Financial access is just the first step to financial inclusion.
Financial Health, Inclusion Part of the PayPal Business Model
- PayPal’s commitment to improving financial health is at the core of our business. This priority is manifested through the products and services we develop, the investments we make, the collaborations we enter into and the conversations we spark.
- Products: PayPal is constantly innovating to bring products to market that democratize financial services. PayPal Working Capital allows small businesses with a strong PayPal sales history to get funding in minutes, without a credit check, and repay it using a percentage of their PayPal sales. [link] Xoom helps individuals send money to their friends and family back home at nearly half the cost of traditional remittances services (3.93% of the amount sent compared to 7.45% average). [link]
- Investments: PayPal has invested in companies and initiatives innovating on various approaches for improving people’s financial health. For instance, PayPal recently invested in Acorns, an app aimed at helping millennials, in particular, build long-term savings by automatically investing their change. [link]
- Partnerships: PayPal has engaged in a number of partnerships with social impact organizations who have made it their goal to improve financial participation and health. We have partnered with Kiva, a nonprofit organization pioneering micro-lending, for 10 years to process loan activity free of charge. [link] PayPal also recently announced a global collaboration with Village Capital, an organization that finds, trains, and funds social impact entrepreneurs developing solutions for underserved populations around the world. [link]
- Thought Leadership: PayPal and our executive leaders are regularly engaging in constructive conversations with stakeholders and thought leaders, through memberships and affiliations with organizations such as the World Economic Forum and the Center for Financial Services Innovation. Through these relationships, we explore ways to evolve our products to be more accessible and inclusive and help evolve the industry conversation beyond inclusion to a broader financial health vision.
Financial Inclusion Creates Opportunities, Provides Relief to Underbanked
- Digital financial services could result in 95 million new jobs, inclusion of 1.6 billion more people in financial system (more than half of whom would be women), and a $3.7 trillion boost to GDP by 2025 (2/3 of which is from increased usage of digital services). [link]
- The Center for Financial Services Innovation (CFSI) estimates that the underbanked in the U.S. spend more than $145 billion to manage their financial lives, spending nearly as much on interest and fees to use their money as they do to buy food. [link]
- According to the World Bank, 43% of Indian bank accounts remain dormant, which accounts for 195 million of the 460 million adults with dormant accounts around the world. 73% of consumers in India expressed a desire to have access to more financial products and services like loans and credit. [link]
Financial Health of Individuals and Businesses Intertwined
- Our financial health vision extends beyond individuals to businesses and communities as well. The health of one has a huge impact on the health of all the others. Financially healthy individuals and families spend their money at local shops and businesses and start companies of their own. They invest in their education and the education of their children. They support each other and give back to their communities. Financially healthy businesses create jobs that pay good wages and offer solid benefits, and they support the economic and cultural life of their communities. Financially healthy communities invest in transportation, education, health care, and public safety.
- To fully deliver on FinTech’s potential to improve financial health and expand economic opportunity will require an unprecedented level of collaboration across the financial services ecosystem. No one organization can do it alone, and at PayPal we’re committed to working with like-minded partners across the public, private and social sectors.
There are several ways that the public sector can work to improve financial health. Education (offering classes and better, more transparent information on how to manage money and take advantage of digital financial services), identity (ensuring that every citizen has official government identification, which opens the door to accessing and using secure financial services), Internet access (expanding connectivity and making it more affordable for everyone), and bank accounts (lowering the regulatory requirements associated with basic banking functions for the underserved) all work together to improve financial health. Also, private and public collaboration to address the technical, economic and regulatory barriers that exist today would greatly benefit the move towards a more financially healthy society.