Impact of Fintech Development on Savings, Borrowing and Remittances : A Comparative Study of Emerging Economies

Fintech is rapidly changing the landscape for financial services in terms of accessibility and affordability, especially in this post-COVID era. Digital finance now has the potential to be a game changer for the nearly two billion financially excluded persons in the developing and emerging world. Non-bank providers such as mobile money services have expanded and are leapfrogging ahead of conventional banking services. This study investigates the linkages between fintech development and demand for financial services using data from the world's first global ranking of fintech ecosystems - the Global Fintech Index (GFI). The GFI is an industry tool which scores 65 countries based on the size of their fintech ecosystem, the performance, and the business environment. We use a min-max method and geometric mean approach to normalize and weight the GFI Score to assess the effects of fintech development on demand for savings, borrowing, and remittances for 16 of the world's largest emerging economies. Our results show that the development of fintech ecosystems plays a key role in improving financial inclusion in emerging economies, but considerable heterogeneities still exist across populations in terms of gender, age, education, and socioeconomic status. Regional heterogeneities are also observed, especially when comparing Latin American and Asian economies to other regions of the world. While more developed fintech ecosystems appear to translate to greater accessibility of financial services, additional evidence suggests that access may not directly translate to greater usage of those services. The findings have important implications for key public and private-sector stakeholders in the emerging world, considering the groundbreaking role that fintech and other digital technologies can play in the development of new models for financial inclusion, especially for populations most vulnerable to digital transformations