A staggering 1.7 billion adults globally remain excluded from the formal financial system due to factors ranging from infrastructure to education to public policy, according to the World Bank Group. And Brookings reports that the COVID-19 pandemic and its enduring impact on the global economy have exacerbated these long-term challenges, widening wealth and income gaps even further in recent years.  

Financial inclusion is a cornerstone of economic empowerment and societal progress. Asset managers stand at the forefront of this challenge, uniquely positioned to combat anxiety, especially surrounding personal finance and retirement, by emphasizing income generation and offering a diverse range of investment and retirement products. We must learn from each other and join forces in creating a more robust and sustainable financial ecosystem.  

Many would agree that by championing financial inclusion globally, we can enable financial security. The question is…how?

Three years ago, Principal launched the Global Financial Inclusion Index (GFII),¹ which provides a comprehensive framework for understanding the critical role that governments, financial systems, and employers play in fostering inclusion. It ranks 42 markets on three pillars of financial inclusion. These pillars represent the key stakeholders responsible for promoting financial inclusion across the population.

The ability to transform innovative ideas into tangible, meaningful change is paramount.

This research underscores that financial inclusion cannot be accomplished by a single institution. Instead, we must partner to build a holistic ecosystem that educates people to make informed financial decisions and empowers them with tools to save, borrow, and invest. While the decisions and tools may vary over time and across different cultures, the universal goal remains the same—we all desire to meet our financial goals and live a financially secure life.  

According to our latest consumer sentiment research, 39 out of the 41 surveyed markets worldwide have experienced a decline in perceptions of financial inclusion. Asia saw the same shift in sentiment, as the population feeling financially included plummeted in markets with historically positive sentiments like Singapore and Hong Kong year-over-year through a period of global economic uncertainty.  

Looking ahead, I believe our solution lies in a multifaceted approach that harnesses the power of technology while also leveraging behavioral economics and policy incentives. Financial incentives, such as tax credits or matching contributions, can encourage retirement savings, particularly among low-income earners. Furthermore, the evolution of FinTech has been instrumental in driving financial inclusion globally, especially in emerging markets. Advancements in digital finance have expanded access to banking products, enabling more people to participate in the formal financial system.  

Another highlight from this year’s consumer research is the impact of technology on Asia's financial inclusion journey. To use Malaysia as an example, 85 percent of individuals we surveyed expressed confidence in making secure online transactions. Looking ahead, 70 percent believe that the integration of artificial intelligence in financial services will provide them with enhanced tools for financial management. These opinions suggest that a continued focus on digitization will be welcomed and will help with the elimination of barriers to savings and investments. Yet, access to digital services alone is not enough—we must also address the underlying issues of rising debt and falling savings. 

In a world facing complex challenges, from demographic shifts to economic uncertainty, the ability to transform innovative ideas into tangible, meaningful change is paramount.  

And the call to action is clear: We all must pledge to collaborate with government, industry partners, and nonprofits to transform ideas into purposeful actions. Together, let us embark on this journey toward a more inclusive and prosperous future for all.

^[1] The GFII is a proprietary model output based upon certain assumptions that may change, are not guaranteed, and should not be relied upon as a significant basis for an investment decision.