The researchers behind a new study claim that the United States has declined in its “financial inclusion” compared to other global markets.
This is according to the Global Financial Inclusion Index, which was compiled by the Centre for Economics and Business Research and the Principal Financial Group.
According to their website, the “Global Financial Inclusion Index ranks 42 markets on three pillars of financial inclusion.” These pillars are the degree to which individual governments promote financial inclusion, the availability and uptake of various types of financial products and services, and the level of support provided by employers to their employees.
2023 marks the second release of this index.
Using this system, the index shows that Singapore ranks highest among all markets for financial inclusion. This ranking is unchanged from last year, although Singapore did improve upon its score.
The city-state is followed by Hong Kong in second, Switzerland in third, and the United States in fourth place. The U.S. score declined compared to last year, causing it to fall from its year-one second-place ranking.
According to the report, the US lost points in this index mostly because of lower employer support. It reads:
The U.S. dropped in the rankings across all indicators in the employer pillar, experiencing falls year over year for the provision of guidance and support around financial issues (rank down 20 places to 26th) and employer pay initiatives (rank down 17 places to 21st).
The report also shows that company size often determines the level of employer support, with larger businesses dropping more than midsize ones.
According to Chris Littlefield, president of Retirement and Income Solutions at Principal Financial Group, this lower level of employer support may be driven by tough economic conditions “and related cost-cutting measures” as a result of inflation and the worry over possible recession.
Despite this decline, the US still leads all other markets in financial system support. This is primarily driven by superior access to credit, rights for borrowers, and lenders’ protection, as well as the presence and quality of financial technologies.
To summarize the report in its entirety, Kay Neufeld, director and head of forecasting at the Centre for Economics and Business Research – says the following:
The 2023 results underscore the significant disparities in financial inclusion between emerging economic regions and advanced economies, where the latter dominate the higher rankings. This largely confirms trends observed in the previous iteration of the Index, where we identified a clear connection between economic advancement and financial inclusion.