The Global Financial Inclusion Index Key themes The world’s largest economies are failing to make progress toward greater financial inclusion.

The world’s largest economies are failing to make progress toward greater financial inclusion.

The 2023 Global Financial Inclusion Index finds that large economies are generally stagnating or deteriorating in terms of financial inclusion.

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4 min read |

Some of the largest, oldest global economies risk backsliding on financial inclusion, according to findings from the 2023 Global Financial Inclusion Index (Index).

“In last year’s report, we identified a number of categories into which the 42 markets analyzed can be divided,” says Seema Shah, chief global strategist for Principal Asset ManagementSM. “These categorizations provide an indication of some of the short-, medium-, and long-term risks to which economies are exposed.

“Broadly speaking, Europe’s largest, oldest economies fell into the category of mature, backward-looking economies and Southeast Asian economies, by contrast, fell into the category of young, forward-looking economies. In this year’s data, we see a widening gulf between the two, with levels of financial inclusion in large developed markets stagnating or even deteriorating. Those that have built their financial systems from the ground up with technology at their foundation are now making leaps forward.”

The Index’s top ranked markets, Singapore and Hong Kong, are good examples of this contrast. Both improved or held steady their high ranking for volume of real time transactions and sit in the top 10 for the access to capital indicator. Their positions as enablers of business confidence also increased year over year.

The results suggest that some of the world’s largest and oldest economies are insufficiently investing in their financial services infrastructure and are at risk of failing to futureproof financial inclusion for their populations. Meanwhile, newer, more modern economies in regions like Southeast Asia are currently investing in initiatives—predominantly around digital finance—that could make a significant difference to financial inclusion, growth, and economic resilience in the future.

How large economies performed in the 2023 Index

Across Europe’s largest economies, scores and rankings either declined or remained flat.

Germany saw the largest drops in both ranking and score (rank down seven places; score down 8.6 points), followed by France (rank down two places; score down 0.1 points), Spain (rank remains the same; score down 0.7 points), and Italy (rank remains the same; score up 0.1 points).  

Equally, large economies in North America and Asia Pacific have also seen financial inclusion deteriorate relative to other markets—showcasing sharper declines than their European counterparts. Within this group, the United States (rank down two places; score down 0.9 points) has fallen the least and is still high in the rankings at fourth overall. More notable changes can be seen in Canada (rank down three places; score down 5.4 points), Australia (rank down two places; score down 4.7 points), Japan (rank down five places; score down 4.6 points), and New Zealand (rank down four places; score down 4.6 points).  

Mediocre performance in the financial system support pillar underpins some of these wider declines. In Europe, for example, France (rank down three places; score down 8.7 points) and Germany (rank down 10 places; score down 18.1 points) saw significant falls in the volume of real-time transactions indicator (rank down 13 places to 34th and down eight places to 25th, respectively) and sit in a moderate position for the access to capital indicator (14th and 17th, respectively). They also both languish at the bottom of the rankings as an enabler of general business confidence (35th and 34th, respectively). Japan, Australia, and New Zealand follow a similar pattern.

Comparing performance of forward and backward-looking economies in the 2023 Index
Market Financial system support pillar Volume of real-time transactions indicator Enabler of general business confidence indicator Access to capital indicator
2023 rank YoY change in rank 2023 rank YoY change in rank 2023 rank YoY change in rank 2023 rank
Australia 10 -8 12 -3 27 -6 16
France 30 -3 34 -13 35 +1 14
Germany 23 -10 25 -8 34 -2 17
Japan 25 -6 23 -8 40 +1 25
New Zealand 16 -11 40 -3 20 +10 19
Singapore 3 0 10 0 10 +6 1
Market 6 0 9 +3 6 +4 10

Note: No YOY change for access to capital, as it’s a new indicator added in 2023.

Of Europe’s largest economies, the United Kingdom bucks the trend (rank up seven places; score up 3.9 points), driven by improvements in the financial system support pillar (rank up six places; score up 8.8 points).

Within this pillar, the U.K. saw notable improvements in the financial services industry as an enabler of small and medium enterprise (SME) growth and success (rank up six places to 31st), enabler of general business confidence (rank up eight places to 26th), and presence and quality of fintechs (rank up two places to first). The U.K. ranks sixth overall in the access to capital indicator (score of 44.8).

“While the data suggests the U.K. made the largest strides forward in financial inclusion in Europe, this is not the full story,” Shah says. “The actions of the U.K.’s financial system to protect the financial well-being of the population was, in large part, a direct response to a self-inflicted wound from the government.

“The ‘mini budget’ under former Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng created economic chaos and a potential pensions crisis. The banks’ ability to maintain access to credit and provide stability to smaller businesses is reflected in the U.K. data and its rise in the overall ranking. But this is more a case of fixing a problem of its own creation rather than meaningful progress in financial inclusion. We remain very cautious on the U.K.’s economic outlook, and in Q3 2023 we adjusted our portfolios to reduce U.K. exposure.”

What's next?

Explore more insights from the 2023 Global Financial Inclusion Index report (PDF).