Introduction

Financial services have transformed rapidly in recent years. The financial technology revolution features breakthroughs in artificial intelligence and the entry of big technology companies and non-banks. These shifts have expanded access for those previously financially excluded. New technologies have enhanced connectivity, risk analysis, fraud detection and the personalisation of services.

In principle, these changes can support meaningful gains for individuals’ financial health. Financial health encompasses individuals’ ability to manage their finances, build resilience to financial shocks, achieve financial goals, and feel secure about their financial lives.

Measuring financial health

Accurately measuring the financial health of households and individuals requires both objective and subjective elements. Objective measures include savings levels, debt-to-income ratios, the share of consumer loans or use of overdraft facilities and credit card debt. Subjective measures assess individuals’ confidence, sense of control and satisfaction.

Available data suggest that in some countries, financial health outcomes have deteriorated despite digital innovation. In Kenya, the share of respondents who are “not financially healthy” rose from around 60% (3) to 80% (3) between 2016 (3) and 2021 (3) and stayed at that level in 2024 (3).

Opportunities for digital innovation to improve financial health

Payments have become faster, cheaper and more accessible. Fast payment systems have seen rapid adoption, with users in over 135 (5) jurisdictions having access to a domestic or regional system.

New methods of credit assessment can extend credit to otherwise excluded borrowers. Traditional scoring methods rely on credit histories and collateral, whereas new methods use alternative data and artificial intelligence. In Argentina, evidence suggests that if a big technology company used only traditional data, 30% (6) of the firms granted credit would be deemed high risk and excluded.

Digital innovation can help to promote saving and democratise access to investment opportunities. Digital platforms enable retail investors to participate in markets by enabling fractional ownership of financial products. Additionally, digital tools are reshaping insurance markets by reducing frictions and supporting embedded insurance.

Risks of digital innovation for financial health

Digital innovations also introduce vulnerabilities. Innovation enables criminals to easily increase the scale and scope of fraudulent activities. A 2024 (9) global survey showed that almost half (9) of respondents encountered a scam at least once (9) a week in the past year. Overall, scams resulted in an estimated $1 trillion (9) of total losses worldwide.

Easier credit can result in excessive borrowing and overindebtedness. Digital technologies can also lead to algorithmic biases in new credit scoring methods. For retail investors, the use of publicly available artificial intelligence tools is becoming increasingly common. A 2023 (11) survey found that 47% (11) of Americans rely on ChatGPT for stock recommendations.

Finally, a reliance on digital innovation can lead to reduced access to financial services that households and small businesses continue to rely on, particularly where digitalisation outpaces inclusion.

Policy responses

Policymakers play a critical role in ensuring innovation strengthens financial resilience. Authorities have introduced guidelines on the responsible use of new technologies and strengthened financial consumer protection frameworks. They have also improved their financial capability efforts.

National authorities have established liability frameworks for digital fraud. Some authorities have issued regulatory frameworks for digital lending, focusing on licensing and registration of previously unregulated providers. Market regulators have also issued public statements advising retail investors on the risks of using artificial intelligence tools.

A key way to support jurisdictions is to help create public infrastructures. Digital public infrastructures, including digital identity, fast payment systems and data-sharing frameworks, can support inclusive and efficient financial ecosystems.

Conclusions

The digitalisation of financial services offers significant potential to strengthen financial health by lowering costs and broadening access. However, evidence of the relationship between digitalisation and financial health is mixed, and new risks have emerged.

Policy frameworks are evolving to capture the benefits of digitalisation while mitigating harms. A holistic approach is needed in responding to the use of new technologies, alongside targeted measures. Effective responses will rely on collaboration among financial authorities, market participants and other stakeholders, ensuring that digital transformation remains inclusive by design.