The Impact of FinTech Adoption on Traditional Financial Inclusion in Sub-Saharan Africa

Abstract

This study investigates the impact of FinTech adoption on traditional financial inclusion in 22 countries in sub-Saharan Africa (SSA). The study utilizes the World Bank’s World Development Indicators data and the International Monetary Fund’s Financial Access Survey data. This study employed Principal Component Analysis (PCA) to construct the dimensions of traditional financial inclusion and the overall financial inclusion index. Applying the Generalized Method of Moments estimation technique to annual data spanning from 2004 to 2022, the findings show that FinTech has a negative and statistically significant effect on the geographic and usage dimensions. However, it has a positive and statistically significant impact on the demographic dimension and the overall traditional financial inclusion index. These findings indicate that FinTech does not have a detrimental impact on traditional financial inclusion, which is contrary to the findings of other studies. Therefore, in order to enhance the degree of financial inclusion in SSA, it is important for traditional financial inclusion to effectively utilize FinTech.