Assessing financial inclusion in Spain

AFi released the report "Financial Inclusion in Spain" in which it highlights the importance of this issue for a sustainable and inclusive economic development, analyzing the situation of the Spanish financial sector in regard to “unpopulated rural Spain” phenomenon, the banking concentration or the impact of digitalization and the covid-19 crisis on the traditional branch business.

• In Spain the degree of financial inclusion is considered practically universal, with more than 95% of the population having bank accounts. The “unpopulated rural Spain" is a challenge for the provision of basic services in general, not just financial services. Banking institutions have developed alternative channels to serve clients in more depopulated municipalities (mobile offices, financial agents, or the agreement signed by Santander with Spanish public postal undertaking).
• The branch network in Spain is the second largest in Europe (in terms of branches per million inhabitants), with a density ratio well above the European average, despite the closure of bank branches since the financial crisis. 
• This trend of branch closures, which has also been observed in all European countries, will continue and is due to an irreversible change in the business model. The COVID crisis will deepen this trend due to the increase in operations through digital channels during the pandemic and the need to improve the efficiency and profitability of institutions in a post-Covid world. 
• From the point of view of competition and in relation to the concentration of the banking sector, the traditional concentration indicators (based on branch or credit market shares...) are losing their usability, due to the entry of new digital competitors that do not require physical presence to provide their financial services. In terms of banking concentration in Spain, there are still banks coming from former savings banks and credit cooperatives that hold very significant market shares in their territories, especially in less populated areas, which serve as a counterweight to the large national institutions. New digital competitors have great potential to boost competition in these areas.
• To ensure that the digitalization of financial services is a tool that facilitates financial inclusion, it will be necessary to have a strong and, above all, homogeneous regulatory and consumer protection framework (under the principle of “same regulation for the same activity”).