Adoption of digital finance could add $3.7 trillion dollars to the GDP of emerging markets economies, including $1.1 trillion in China alone, according to a new McKinsey & Company report.

The strategy consulting firm’s Global Institute released Digital Finance For All: Powering Inclusive Growth in Emerging Economies, at a New York event featuring a keynote by Gates Foundation co-chair Melinda Gates.

“The motivation for this report was to better measure the value of digital finance and greater financial inclusion in emerging markets,” McKinsey’s Susan Lund, a co-author said. “Few doubt that financial inclusion and mobile money dramatically reduce costs or boost economic growth. We wanted to apply our analytical tools to more accurately size what it’s worth to these regions.”

Compared to advanced economies, many of these areas can be data desserts when it comes to statistics on particular consumer behavior or business sectors. In Africa, for example, several recent GDP revisions revealed outdated statistical methods were missing billions of dollars in economic activity.

Most of the blame for the missing numbers falls squarely at the feet of the cash-based economies that comprise the majority of financial activity in these markets. Roughly 90% of transactions in high growth markets are done with cash. Cash does not leave the “rich datasets created by digital payments,” which can expose statistical blind spots and spur greater lending by creating more complete credit reporting.

McKinsey’s report emphasizes the greater lack of financial inclusion in its focus regions. It pegs 45 percent—or two billion individuals—as unbanked “and 200 million micro, small, and medium-sized enterprises (MSMEs) with “no or insufficient access to credit.”

McKinsey’s survey then offers compelling projections on the potential of digital finance—defined as “financial services delivered over digital infrastructure…with low use of cash…”—to transform emerging market economies.

Some of the highlights of fintech adoption across Africa, Asia, Latin America, and the Middle East include the following:

  • A $3.7 trillion boost to GDP by 2025
  • Creation of 95 million new jobs
  • Inclusion of 1.6 billion more people in the financial system; and
  • New deposits of $4.2 trillion


McKinsey views mobile based financial services as the most effective conduit to reach the unbanked. Mobile phone penetration, which stood at 80 percent in emerging markets in 2014, is expected to increase to 90 percent by 2020, according to GSMA data referenced in McKinsey’s report. “When it comes to access to financial services, mobile provides a leapfrog option in emerging economies,” said Lund. She highlighted a report finding that access to traditional financial accounts in emerging markets is strongly correlated to higher income, while access to mobile digital banking products is not. “Because mobile money based services are 80-90 percent cheaper, they can be offered at lower income levels.”

An estimated 880 million women in emerging economies could gain first time financial account access through adoption of mobile and digital finance, according to McKinsey. Fintech services could open up $2.1 trillion in credit to individuals and MSMEs.

McKinsey’s report offers several country case studies where it estimates the “GDP boost” potential of digital finance to each economy: China ($1.1 trillion), India ($700 billion), Brazil ($152 billion), Mexico ($90 billion), Nigeria ($88 billion) and Ethiopia ($15 billion).


Meeting this potential requires governments to create “risk-proportionate financial-services regulation” and environments that foster “widespread digital environments.”

While the emerging markets digital finance report does not offer investment advice, McKinsey’s Lund thinks U.S. tech actors will take note of the findings and offered some advice.

“This is a profitable business opportunity and the door is wide open. But local partnerships will be important in navigating these markets strategically,” she said.

Featured Image: Bryce Durbin

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McKinsey says digital finance adoption could add trillions to high growth economies