Driving Financial Inclusion: The Role of Financial Development and Financial Technology in G20 Economies
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Abstract
This study aimed to examine the influence of financial development and financial technology (fintech) on financial inclusion in G20 member countries. The study explored how traditional financial instruments, such as credit cards, debit cards, and ATMs, as well as fintech services, contribute to improving access to formal financial services. Additionally, the study analyzed the impact of economic conditions, particularly inflation, on cashless transactions, as an indicator of financial inclusion. Using a multi-year panel dataset covering G20 economies from 2012 to 2023, the research applied panel-data regression models with country and year fixed effects, controlling for macroeconomic variables such as inflation, market capitalization, and bank branch density. The results revealed that the use of credit cards and electronic payments is positively associated with enhanced financial inclusion. Conversely, the number of ATMs shows a significant negative effect, indicating that the availability of traditional banking infrastructure encourages the continued use of cash, thereby hindering the adoption of cashless transactions. On the other hand, fintech, including e-money accounts, is found to have a highly significant influence on increasing cashless transactions, highlighting the critical role of financial technology in expanding access to formal financial systems. Furthermore, inflation has a significantly negative impact on financial inclusion, as high inflation reduces purchasing power and diminishes trust in formal financial systems. These findings underscore the importance of supporting fintech, reducing reliance on physical banking infrastructure, and maintaining stable macroeconomic policies to promote financial inclusion in G20 member countries. This study provides clear policy implications regarding the necessity of advancing digital financial services to achieve broader financial inclusion.
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References
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