Financial inclusion and social outcomes in the European Union: Evidence from time-series analysis

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Type of the article: Research Article

Abstract
Financial inclusion has become increasingly central to the European Union’s social policy agenda amid digital transformation, recurrent economic shocks, and persistent poverty and inequality concerns. This study aims to assess the impact of financial inclusion on poverty risk and income inequality in the European Union, with particular attention to non-linear and long-run effects. The analysis uses annual aggregate EU-level data for 2004–2023. It applies time-series econometric methods, including correlation analysis, unit root and Granger causality tests, linear and quadratic regressions, and Error-Correction Models. The results indicate that financial inclusion does not exert a uniform direct linear effect on social outcomes. Correlation analysis shows a strong association between digital financial use and income inequality (e.g., card transactions and the Gini coefficient: r = −0.69; internet banking use and the Gini coefficient: r = −0.63), while correlations with poverty risk remain weak. Regression results confirm that most financial inclusion indicators have no statistically significant linear effect on poverty risk. However, a significant non-linear (inverted U-shaped) relationship is identified between card payment transactions and poverty risk, indicating that poverty risk declines once digital payment usage exceeds a threshold. In contrast, income inequality is significantly and negatively associated with traditional financial access, as increases in bank branch density per 100,000 inhabitants reduce the Gini coefficient in both the short and long run. Overall, the findings show that the social effects of financial inclusion in the EU are outcome-specific and depend on the form and intensity of inclusion rather than access alone.

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    • Table 1. Descriptive statistics of key variables (EU, 2004–2023)
    • Table 2. Selected correlation matrix
    • Table 3. Summary of regression results: financial inclusion and poverty risk in the EU
    • Table 4. Summary of regression and causality results: financial inclusion and income inequality (Gini coefficient)
    • Conceptualization
      Daiva Laskienė, Serhiy Lyeonov
    • Funding acquisition
      Daiva Laskienė, Vilda Gižienė, Serhiy Lyeonov
    • Investigation
      Daiva Laskienė, Vilda Gižienė, Serhiy Lyeonov
    • Methodology
      Daiva Laskienė, Vilda Gižienė
    • Project administration
      Daiva Laskienė, Serhiy Lyeonov
    • Resources
      Daiva Laskienė, Rugilė Šiukščiūtė, Vilda Gižienė
    • Supervision
      Daiva Laskienė, Vilda Gižienė, Serhiy Lyeonov
    • Validation
      Daiva Laskienė, Rugilė Šiukščiūtė, Vilda Gižienė
    • Writing – original draft
      Daiva Laskienė, Rugilė Šiukščiūtė, Vilda Gižienė, Serhiy Lyeonov
    • Writing – review & editing
      Daiva Laskienė, Rugilė Šiukščiūtė, Vilda Gižienė, Serhiy Lyeonov
    • Data curation
      Rugilė Šiukščiūtė, Vilda Gižienė
    • Software
      Rugilė Šiukščiūtė
    • Visualization
      Rugilė Šiukščiūtė
    • Formal Analysis
      Vilda Gižienė, Serhiy Lyeonov
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Investment Management and Financial Innovations
Investment Management and Financial Innovations