IMF Working Papers

The emergence of financial technologies—fintech—has become an engine of change, promising to expand access to financial services and give a boost to financial inclusion. The ownership of accounts in formal financial institutions increased from 51 percent of the world’s adult population in 2011 to 76 percent in 2021, but there is still significant variation across countries. So has the rapid growth of fintech delivered the promise of broadening financial services to the under-served populations? In this paper, I use a comprehensive dataset to investigate the relationship between fintech and financial inclusion in a panel of 84 countries over the period 2012–2020 and obtain interesting empirical insights. First, the magnitude and statistical significance of fintech on financial inclusion varies according to the type of instrument. While digital lending has a significant negative effect on financial inclusion, digital capital raising is statistically insignificant. Second, the overall impact of fintech is also statistically insignificant for the full sample, but becomes positive and statistically highly significant in developing countries. Policymakers need to develop an adequate regulatory framework that balances fostering innovation and ensuring equitable treatment of individuals and groups. This requires better financial education, strong regulatory institutions, and well-calibrated prudential regulations for a level playing field and effective supervision.