Financial inclusion is an important lens through which investors can assess the underlying economic resilience of a market and its growth prospects
The United Kingdom is the now the 11th most financially inclusive market out of 41 analyzed globally, according to the 2024 Global Financial Inclusion Index (the Index) from Principal Financial Group® and the Centre for Economics and Business Research (Cebr). While still in the top third of markets ranked, it now sits outside the top ten markets globally, falling four places year-over-year from seventh to 11th.
Financial inclusion has improved globally for the second consecutive year, with all regions seeing advancements, according to annual research from Principal® that ranks markets based on the support provided by employers, the government, and the financial system to foster financial inclusion*.
As global economic challenges made it harder for businesses and households to access lending this year, the public and the private sectors stepped up to help societies weather declining financial conditions; 32 out of 41 markets (78%) saw their scores for financial inclusion increase year-over-year.
Access the full report findings and learn more about the Global Financial Inclusion Index here.
U.K. decline driven by reduced support from the financial services sector and relatively smaller improvements in government support compared to other markets.
The U.K. fell four places for government support (to 17th) and four places for financial system support (to eighth).
- While its rank remained flat for employment support, it sits at very near the bottom of the rankings in 39th place out of 41 markets.
- The U.K. ranks eighth for the state of its public pension system but saw falls in education levels (rank down six places to 16th) and for awareness and uptake of government mandated pension and savings schemes (rank down three places to 23rd).
- It ranks in the bottom half of the table for all employer-backed financial inclusion metrics**.
U.K.’s lack of further fintech growth is a barrier to building a healthier long-term savings culture
The U.K.’s gross domestic savings as a percentage of GDP is 17.5%, according to World Bank data***. This falls considerably below the global median of 20.2%. Equally, the U.K. saw its scores fall 23.8 points in the Global Financial Inclusion Index for the presence and quality of its fintech sector, in part reflecting the challenges faced by fintechs due to lingering economic uncertainty.
The data suggests economies like the U.K which may not be sufficiently investing in their financial digital infrastructure are also witnessing a lesser propensity to save money among their populations.
Seema Shah, Chief Global Strategist, Principal Asset ManagementSM, comments: “The U.K. has well-developed financial systems that facilitate good access to services such as bank accounts, which enable people to save. However, the U.K. looks pretty backward-looking compared to younger markets, for example, in Asia which have ensured their financial infrastructure is tech enabled and suitable for a modern, digitized economy. A more digital financial system allows people to smooth their consumption, more easily track saving and spending, and push income potentials higher.
“By contrast, the U.K.’s comparatively lower investment in technology risks failing to modernize a long-term savings culture that will keep pace with aging demographics. The economic data for the U.K. is currently looking positive: we are the fastest growing economy in the G7, and GDP, unemployment and inflation are all broadly going in the right direction. However, investing more in the financial future of the population may be critical for the U.K. to remain an attractive destination for capital in the long term”
Key global findings:
Advancement in the financial system pillar continues to be a key driver for improvements in financial inclusion globally. Financial system support improved globally by 5.9 points. This is slightly less than in 2023 when it rose by 8.1 points. Latin America saw the greatest rises in financial system support, rising by 8.3 points year-over-year. East and Southeast Asia also registered gains of 4.1 and 5.6 points for financial system support respectively. By contrast, the U.S. and Canada was one of three regions to register a decline in financial system support, alongside Northern Europe and Oceania.
Markets where fintech growth is accelerating are more likely to have a greater savings culture. Around three quarters (74%) of markets where data is available have gross domestic savings as a percentage of GDP above the global median. Of these, 79% saw improvements in their fintech sectors. By contrast, 25% of markets have gross domestic savings as a percentage of GDP below the global median. Of these, only 60% saw increases in their fintech quality scores. This suggests that the higher household savings rates in economies with rapidly developing fintech sectors is evidence of greater household resilience during downturns and the foundation of growth through investments.
Developing markets in Southeast Asia may be reaching a tipping point for financial inclusion. Following accelerated growth in fintech and online services over the past few years, progress in markets such as Thailand, Malaysia, Indonesia, and Vietnam is tapering off. This may be a result of some developing markets’ inability to react quickly in response to tough economic conditions but could also suggest these markets have reached a level of financial maturity where progress may now be incremental but nonetheless is moving in the right direction.
Singapore retains its top-ranking position for the third consecutive year. Singapore has maintained its position at the top of the Global Financial Inclusion Index for the third consecutive year, securing first place in both government and employment support and ranking fourth in financial system support. Singapore’s top ranking can be interpreted as a function of the government, financial system, and employer pillars working effectively in tandem.
Argentina leads the way as Latin American markets make leaps forward in financial inclusion. Argentina made the biggest improvements in this year’s Index. While it still sits within the bottom half of the rankings (28th), it rose by 14 places. Argentina’s rise is due to its strong performance in the financial system support pillar, where it jumped 20 places to 22nd. This improvement is largely due to the market’s accelerated adoption of real-time payment methods, where Argentina climbed 32 places to rank fourth. The financial inclusion advancements in Argentina are reflective of a broader trend across Latin American markets.
Christopher Breen, head of economic insight, Centre for Economics and Business Research, comments: “The past year has been marked by a combination of significant macroeconomic and geopolitical challenges. Against this backdrop, it is very positive news that financial inclusion has improved in so many markets across the Index. This reflects governments, the financial system, and employers stepping in at the point of need. While there is still clearly room for progress, the increases in financial inclusion are a testament to the investment and positive progress these groups have made in recent years.”
