Half of citizens do not understand basic financial concepts. This is one of the conclusions of the latest Financial Competencies Survey (EFC) by the Bank of Spain and the CNMV, published recently. In many countries, the population is not familiar with basic concepts related to inflation, compound interest, or risk diversification. “In a context like the current one, with the increasing complexity of financial products, a lack of knowledge can make it difficult to choose the most appropriate savings, insurance, or debt vehicles for each individual,” the study states.
The fact that this is an international problem does not soften the main conclusion of the study: it is crucial that we, as a society, advance towards greater and better financial education. In Spain, 97% of the population admits to having a current account, a good example of high financial inclusion, which should serve as an incentive to continue moving in the right direction. Effective financial inclusion relies on both access to and availability of financial services, as well as their efficient and well-informed use. Education is fundamental for making appropriate financial decisions in an extremely complex financial environment like the present one.
According to the latest World Bank report, the digitalization process contributes significantly to financial inclusion. Improved access to open, transparent, and competitive digital services facilitates income management and limits assumed risks. This enhances savings management under a highly efficient scheme. Spanish banks lead the digital transformation of the sector in Europe and are key to the innovative process demanded by society. Our institutions also face the ongoing challenge of simplifying their applications and improving user training, thereby prioritizing both ease of use and transparency.
Digitalization can be very effective in advancing financial inclusion for all of society. However, for it to truly contribute to this goal, a certain level of financial literacy is necessary to enable families to make sound decisions in managing their finances. Unfortunately, the results of the supervisors’ study do not inspire optimism, although this is not really new. Spanish banks, for example, have been making significant efforts for years to improve society’s financial literacy. This includes young digital natives who have lived through a financial crisis scenario, as well as older individuals who struggle to benefit from the advantages of digitalization. For these enormous efforts by banks to succeed, collaboration from the rest of society is needed, including academia and families themselves. Authorities should seriously discuss the possibility of incorporating financial education into school curricula.
For years, banks have faced regulatory changes that seem to have no end in their level of demand. Strict supervision validates the reduced room for maneuver banks have to take risks, while clearly establishing the rules under which the relationship between the client and their bank materializes. Regulation and supervision officially pursue the dual objective of ensuring financial stability and strengthening consumer protection, objectives to which clients themselves must also contribute. A lack of financial literacy in society can become a source of financial instability. In other words, financial education in an increasingly digital environment is key to limiting this risk, thereby reinforcing the responsibility of the banking client.
Banks must help their clients make the best financial decisions. However, clients are the most interested in managing their finances optimally with appropriate decisions from a medium and long-term perspective. All of us—authorities, banks, and citizens—must work together to improve society’s financial literacy.
