Fintech dividend: How would digital financial services impact income inequality across countries?

Hailu Adugna

Technology in Society, 2024, vol. 77, issue C

Abstract: Discrimination and marginalization in the financial services provided by traditional intermediaries are often cited as one of the main causes of persistent income inequality across socioeconomic groups in many countries. Whether Fintech eliminates such prejudice and exclusion and promotes equitable income distribution is unclear. This paper examines the impact of Fintech digital financial services on income inequality. Using a two-step generalized methods-of-moments (GMM) estimator, we analyze unbalanced panel data from 65 countries spanning the years 2013–2019. Drawing on the most recent data available on the actual transaction volume of Fintech digital financial services, we generate evidence at the level of specific service segments. We find that Fintech digital lending and digital capital-raising services are significantly and negatively associated with income inequality. Furthermore, our results from mechanism analysis suggest that Fintech mainly impacts income inequality by improving the accessibility and efficiency of financial services. Overall, our findings imply that promoting Fintech is critical to improving financial inclusion and alleviating income disparity.

Keywords: Fintech; Digital financial services; Income inequality (search for similar items in EconPapers)
JEL-codes: D31 D63 O11 O16 O30 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:77:y:2024:i:c:s0160791x24000332

DOI: 10.1016/j.techsoc.2024.102485

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