Formal account inactivity: a global overview, causes, consequences and effect on financial inclusion

Peterson K. Ozili

Journal of Electronic Business & Digital Economics, 2025, vol. 4, issue 2, 246-269

Abstract: PurposeIt is common to hear the phrase “I have a bank account, but I rarely use it”. This phrase describes what formal account inactivity means. This study explores formal account inactivity and how it is a setback for financial inclusion.Design/methodology/approachThe study relies on the technology acceptance model and the technology impact model, and it draws insight from the 2021 global findex dataset.FindingsFormal accounts may remain inactive if adults feel that they have no need for an account, or the bank or financial institution is too far away from them, or they do not have enough money to use an account, or they don’t feel comfortable using the account by themselves or they do not trust banks or financial institutions. Women, uneducated people, unemployed people and poor people are more likely to have an inactive formal account than men, educated, employed and rich people. Asian countries (e.g. India, Nepal, Sri Lanka, Lao DPR), African countries (e.g. Ethiopia, Comoros, Morocco) and South American countries (e.g. Ecuador) have higher number of inactive formal accounts. The consequences and costs of formal account inactivity include decrease in the accountholder’s financial and economic empowerment, increased reliance on cash-based transactions, lack of awareness about new financial services and products, increased reliance on exploitative informal financial service providers, decrease in economic growth, insolvency risk for financial service providers and lower tax revenue for the government.Originality/valueThis study contributes to the literature that examines the consequences of financial inclusion, but which have not examined formal account inactivity as a consequence of financial inclusion.

Keywords: Inactive account; Formal account; Financial inclusion; Digital financial inclusion; Mobile money account; Formal account inactivity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jebdep:jebde-01-2025-0003

DOI: 10.1108/JEBDE-01-2025-0003

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