PREFACE Financial services are the lifeblood of an economy, enabling households and businesses alike to save, invest, and protect themselves against risk. Yet in many emerging economies today, the majority of individuals and small businesses lack access to even basic savings and credit products, which hinders economic growth and perpetuates poverty. Digital technologies starting with a mobile phone have the potential to resolve this problem. Households and businesses can use digital payments and financial accounts to interact seamlessly and efficiently, unleashing large gains in productivity and investment, and prompting greater financial inclusion. While a growing body of research has demonstrated the positive impact that both financial and digital inclusion can have on household welfare, little research to date has quantified the broad macroeconomic and societal benefits. This report aims to fill that gap. The research was led by Susan Lund and James Manyika of the McKinsey Global Institute, and Olivia White and Marc Singer of McKinsey’s Global Banking Practice. Chris Berry, Robin Perani, and Ben Austin led the project team, which comprised Laura Brodsky, Ritesh Jain, Tim Kudo, Esther Lee, Betsy Riley, and Alex Rose. Many other McKinsey colleagues worked closely with the project team to help shape this research, including Jonathan Ablett, Sukriti Bansal, Jaroslaw Bronowicki, Florent Istace, Szabolcs Kemeny, Alok Singh, and Soyoko Umeno. This independent MGI initiative is based on our own research, the insights and experience of our McKinsey colleagues around the world, and McKinsey’s Global Banking Practice and its collaboration with the Financial Services for the Poor team at the Bill & Melinda Gates Foundation. We owe a debt of gratitude to Jason Lamb, Daniel Radcliffe, and Rodger Voorhies of the Bill & Melinda Gates Foundation who were generous with their time and expertise. Our research was also enriched by insights of their colleagues, including Dilly Aberra, Pawan Bakhshi, Hugh Chang, Yixing “Anthony” Gao, Gargee Ghosh, Abi Jagun, SungAh Lee, Sebastian Majewski, Nachiket Mor (also Board Member of the Reserve Bank of India), and Haddis Tadesse. Finally, we thank Gillian LaFond and Nick Egan for their operational support that made the collaboration with the foundation possible. MGI’s academic advisers provided valuable insights and challenged our thinking. We extend sincere thanks to Martin N. Baily, Bernard L. Schwartz Chair for Economic Policy Development at the Brookings Institution; Rakesh Mohan, Professor in the Practice of International Economics of Finance, Yale University School of Management, and senior fellow of the Jackson Institute at Yale; and Laura Tyson, S. K. and Angela Chan Professor of Global Management at Haas School of Management, University of California at Berkeley. We are also grateful for the generous time and attention provided by the many other experts, business leaders, policy makers, and academics around the world who helped shape this report. They are listed following Chapter 4.