For the past two decades, April has been recognized as National Financial Literacy Month in the US as a way to highlight the importance of financial literacy education and the consequences that are associated with financial illiteracy. Financial literacy allows individuals to confidently participate in the economy. And it’s an important issue not only in the U.S, but across the globe. In 2024, there is a new aspect of financial literacy that’s been getting a lot of attention – digital financial literacy. The expansion of the financial technology (fintech) sector promotes more financial inclusion, enabling more people to access financial services online or from their mobile phones. As more and more people rely on new technology to access financial services, it is important that users understand the risks and adapt their behavior to the use of new technologies.

What is Digital Financial Literacy? 

While there are many definitions available, the OECD/INFE defines digital financial literacy as “a combination of knowledge, skills, attitudes and behaviors necessary for individuals to be aware of and safely use digital financial services and digital technologies with a view to contributing to their financial well-being.”   

In its policy brief, The Need to Promote Digital Financial Literacy for the Digital Age, Think 20 (T20), the research and policy advice network for the G20, breaks digital financial products services into four broad categories:

  • Payments: Electronic money, mobile phone wallets, crypto assets, remittance services;
  • Asset management: Internet banking, online brokers, robo advisors, crypto asset trading, personal financial management, mobile trading;
  • Alternative finance: Crowdfunding, peer-to-peer (P2P) lending, online balance sheet lending, invoice and supply chain finance, etc.; and
  • Others: Internet-based insurance services, etc.
Why is it important?

Digitalization and fintech provide both benefits and risks. Digitalization can help to promote financial inclusion by increasing access to financial tools and digital platforms, which may make learning about financial matters more engaging and relevant.  However, without strong digital financial literacy, users can fall victim to frauds like phishing and hacking. They are also more likely to be harmed by predatory lending practices. With the expansion of digitalization and fintech, the need for digital financial literacy has become critical.  

The T20 focused on this when it convened in Japan in 2019. Their policy brief notes the following:

The development of the ‘gig’ economy means that individuals will become more responsible for their own financial planning, including for retirement. Consumers will need to have increasing financial sophistication to make effective use of financial technology (fintech) products and avoid fraud and costly mistakes.

Unfortunately, the OECD/INFE 2023 International Survey of Adult Financial Literacy indicates that digital financial literacy levels may not be sufficient in light of the opportunities and risks posed by digital financial services:

Given the rapid pace of digitalization of the financial sector, digital financial services are becoming increasingly widespread and even the “new normal” in many countries. This latest round of data collection revealed that many people regularly buy goods and services online and/or manage their finances online. Yet findings in this Report also reveal the level of skills related to digital financial services does not seem to match the current behavior and needs.

The OECD/INFE will have more information about this important area of financial literacy soon, as it is working on developing a dedicated digital financial literacy survey.

What are some of the key skills needed for digital financial literacy?

The T20’s policy brief focuses on four dimensions of digital financial literacy:

  1. Knowledge of digital financial products and services.
  2. Awareness of digital financial risks, including phishing, pharming, spyware, and SIM card swaps. This also includes an awareness that a user’s digital footprint, including information provided to digital financial service users, can be a source of risk.
  3. Knowledge of digital financial risk control.
  4. Knowledge of consumer rights and redress procedures.
What can be done?

A series of roundtables held by the World Economic Forum and the Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School resulted in three key insights for more successful digital and financial literacy initiatives:

  • It is essential to embrace new channels and creative approaches for effective reach.
  • Local merchants are a key part of inclusive digital financial infrastructure and need literacy support.
  • Initiatives need to target and be designed for different consumer groups.

One interesting example of this last point about targeting initiatives is the Hey Sister! digital and financial literacy campaign. This campaign, developed by Strategic Impact Advisors with support from USAID, has already made resources available in Ghana, Kenya, Malawi, Rwanda, Tanzania, and Uganda. Learning resources for Latin America are also available.

Clearly, governments and businesses have an important role to play. The OECD report recommends that policymakers and stakeholders include digital financial literacy when developing national strategies and programs.

How can Professional Accountancy Organizations help?

Governments and businesses aren’t the only ones developing innovative programs. Professional Accountancy Organizations can also help by incorporating digital financial literacy in their financial literacy programs. As we noted in our 2021 article, Promoting Financial Literacy: Professional Accountancy Organizations Take On the Challenge,  the accountancy profession can advocate for and facilitate financial education to help improve financial literacy as part of its public interest responsibility. Various professional accountancy organizations across the world have developed programs to improve financial literacy.

How can accountants help?

Accountants serve as valuable allies in enhancing digital financial literacy:

  • They provide expert guidance on financial systems and data: Accountants possess in-depth knowledge of financial systems and can provide guidance on navigating digital tools and platforms. As CPAs embrace digital finance tools, they can provide key strategic advice to clients.
  • They provide security advice: Accountants are well versed in financial security measures, offering insights into protecting against online threats.
  • They are educators: Accountants help translate financial concepts into accessible language, which can help individuals feel more confident in the evolving world of digital finance. They can also host training sessions and workshops to educate individuals and businesses on digital financial tools and practices.

The T-20 policy brief notes that owners of small and medium-sized enterprises (SMEs) and startup firms are particularly vulnerable when it comes to the risks related to digital finance.  An IFAC article,  Financial Literacy for SMEs: A Lifeline to the Lifeblood of the Global Economy, explains the critical role that small and medium sized practitioners (SMPs) can play in helping SMEs.

What’s the Bottom Line?

Digital financial literacy is not just a useful skill; it's a necessity in our increasingly digital world. By contributing to financial literacy, we can empower individuals and promote economic growth on a global scale. Accountants, with their expertise, are pivotal in this mission to enhance digital financial literacy and pave the way for a financially savvy future.

Linda Lach

Director, Governance

Linda A. Lach is Director, Governance and is responsible for IFAC’s governance matters, including management of IFAC’s board and Council and compliance with its Constitution and Bylaws. She also supports the Governance and Planning and Finance Committees.

Previously, Ms. Lach was the Director, Quality and Development, where she was responsible for the program management, implementation, and governance of IFAC’s Professional Accountancy Organization Capacity Building Program funded by the UK Department for International Development.

Before joining IFAC, Ms. Lach was a contributing author on numerous accounting publications for Practitioner’s Publishing Company and served as the associate director of the Center for Financial Integrity at Baruch College (US). Ms. Lach also was the director of professional development for the American Institute of CPAs where she was responsible for conferences, seminars, and self-study professional development courses for accounting professionals. Her previous experience also includes audit and financial management positions.

Ms. Lach has a bachelor’s degree in economics from Yale University and a master’s degree in accounting from New York University. She is licensed as a CPA in the state of New York and is a member of the American Institute of CPAs.

Darlene Nzorubara

Darlene Nzorubara is a Principal at IFAC. She manages the compliance and membership activities of IFAC's members and associates in Africa and supports the PAO Capacity Building Program as well as the MOSAIC (Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration) Steering Committee. She also oversees Africa initiatives under IFAC’s MoU with Gavi, the Global Fund, and USAID to strengthen public finance management for greater accountability and transparency through the effective role of PAOs. 

Prior to joining IFAC, Darlene worked as a research assistant on governance at Baruch College in New York and worked for two years as a legal assistant for a law firm in Paris, France. Darlene has post graduate degrees in international economic law and in business and exportation law from Université René Descartes – Paris V and a Master in Public Administration from Baruch College.