FinTech and Financial Inclusion in Developing Countries: The Moderating Role of Regulatory Quality

Abstract

Financial inclusion remains a major policy challenge in developing countries despite the rapid expansion of digital financial technologies. This study examines the impact of FinTech adoption on financial inclusion while investigating whether regulatory quality moderates this relationship across developing economies. The empirical analysis uses an unbalanced panel dataset covering twelve developing countries over the 2014, 2017, 2021, and 2024 Global Findex survey waves. Financial inclusion and FinTech indicators are obtained from the Global Findex Database, while macroeconomic and institutional variables are collected from the World Development Indicators (WDI) and Worldwide Governance Indicators (WGI). Panel-data estimation techniques are employed, specifically utilising the Panel Fixed Effects (FE) estimator as the primary benchmark framework, supported by Correlated Random Effects (CRE–Mundlak) specifications and comprehensive robustness analyses. The findings indicate that FinTech adoption has a positive and statistically significant effect on financial inclusion across all benchmark estimations. While gross domestic product (GDP) per capita, Internet Users, mobile cellular subscriptions, and regulatory quality do not exhibit significant direct effects, the interaction between FinTech adoption and regulatory quality is negative and significant, suggesting that the contribution of FinTech to financial inclusion is greater in relatively weaker institutional environments. The study contributes to the literature by explicitly modelling regulatory quality as a moderating mechanism rather than merely a direct determinant of financial inclusion. These findings provide new evidence that the effectiveness of FinTech depends on institutional conditions. From a policy perspective, the results suggest that governments should simultaneously promote digital financial services and develop adaptive regulatory frameworks capable of supporting innovation while expanding financial inclusion.