BBVA Compass economists: Internet access is now the key factor in financial inclusion

Financial inclusion is a key measure in development economics. Policymakers have tried to guarantee that the most vulnerable groups in society have fair and equitable access to financial services by lowering barriers to participation, increasing financial literacy, eliminating discriminatory practices and improving the regulatory landscape. But the results of those efforts have been mixed, write BBVA Compass Chief Economist Nathaniel Karp and Senior Economist Boyd Nash-Stacey, with the U.S. ranking 23 out of 38 high-income nations in the percentage of people with a bank account.

"Our research at BBVA Compass has found that giving Internet access to isolated families has the potential to increase the number of individuals with a bank account by 10 percent," they write. "While race and education levels are still major factors in determining financial inclusion, Internet access is what matters most in a fast-moving and digital economy."

Their findings are based on exhaustive research they conducted in the development of their Financial Inclusion Metropolitan Index. The FIMI is a multi-dimensional index that gauges the financial inclusion levels in more than 250 cities. Karp and Nash-Stacey found that Boulder, Colo., was the most financially inclusive area in the nation. The other communities that round out the top five are San Francisco, Seattle, San Jose, Calif., and Washington, D.C. — cities that have all had robust efforts to increase access to technology, Karp and Nash-Stacey write. (See the complete rankings on page 44 of their working paper, "Technology, Opportunity & Access: Understanding Financial Inclusion in the U.S.")

Karp and Nash-Stacey say addressing the cost of internet access is paramount.

"Broadband in the U.S. is among the most expensive in the developed world, a stark irony considering it is the birthplace of the Internet," they write. "... In fact, the cost of broadband in the U.S. is almost twice as that in Finland, Denmark and Sweden — where 100 percent of the adult population has a bank account."

Karp and Nash-Stacey discuss various options for increasing financial inclusion, including by lowering the price of internet access through broadband subsidies and by encouraging more collaboration between different industries. One option, they write, could be for banks "to contribute to the cost of broadband or mobile Internet access based on the clients' usage of banking apps."

"With the proliferation of the virtual economy and the need to keep up with progress, the shortest road to financial inclusion is a fiber-optic one that's paved by both the financial industry and nonbank stakeholders," they write.

Led by Karp, the bank's research team analyzes the U.S. economy and Federal Reserve monetary policy. For its analyses, the economists create models and forecasts for growth, inflation, monetary policy and industries. The economic research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates.  Any statement or opinion of a BBVA Compass economist is that economist's own statement or opinion and does not represent a statement or prediction by BBVA Compass, its parent companies or management.

Follow their work on Twitter @BBVAResearchUSA and @BBVACompassNews.

About BBVA Group 
BBVA Compass is a subsidiary of BBVA Compass Bancshares Inc., a wholly owned subsidiary of BBVA (NYSE: BBVA) (MAD: BBVA). BBVA is a customer-centric global financial services group founded in 1857. The Group has a solid position in Spain, is the largest financial institution in Mexico and has leading franchises in South America and the Sunbelt region of the United States. Its diversified business is geared toward high-growth markets and relies on technology as a key sustainable competitive advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best practices. The Group is present in the main sustainability indexes. More information about the BBVA Group can be found at bbva.com.

About BBVA Compass 
BBVA Compass is a Sunbelt-based financial institution that operates 666 branches, including 340 in Texas, 89 in Alabama, 73 in Arizona, 61 in California, 45 in Florida, 38 in Colorado and 20 in New Mexico, and commercial and private client offices throughout the U.S. BBVA Compass ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (4th). BBVA Compass recently earned top nods for best mobile app and best regional bank in the South & West in Money magazine's annual list of the Best Banks in America. Additional information about BBVA Compass can be found at bbvacompass.com, by following @BBVACompassNews on Twitter or visiting newsroom.bbvacompass.com. 

Editor's Note: 
BBVA Compass is a trade name of Compass Bank.

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