Exploring the impact and risks of fintech adoption on income inequality: A global cross-sectional study

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Abstract

The rapid expansion of financial technology (fintech) has transformed financial services, offering innovative solutions that promote financial inclusion and economic growth. However, its impact on income inequality remains debated (Beck et al., 2018). This study investigates the relationship between fintech adoption and income inequality across 150 countries for the years 2014, 2017, and 2021 using secondary data from the Global Findex database. Income inequality is measured by the share of pre-tax national income held by the top 10 percent, while fintech adoption is captured by the percentage of the population using mobile payments. Key control variables include inflation, financial depth, trade openness, population growth, education level, government expenditure, and gross domestic product (GDP) growth. A quadratic model reveals a non-linear relationship, suggesting that fintech reduces inequality only beyond a certain threshold. Findings indicate that financial depth and population growth exacerbate inequality, while GDP growth mitigates it. The study underscores the importance of inclusive financial systems and regulatory measures to mitigate risks and optimize fintech’s potential in reducing inequality (Demir et al., 2022).

Keywords: Fintech, Income Inequality, Financial Depth, Population Growth, Gross Domestic Product Growth

Authors’ individual contribution: Conceptualization — J.I. and K.B.; Methodology — J.I. and K.B.; Formal Analysis — J.I., N.H., and K.B.; Data Curation — K.B. and L.G.; Writing — Original Draft — J.I. and K.B.; Writing — Review & Editing — N.H., V.P., and L.G.; Supervision — J.I. and K.B.; Project Administration — J.I.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: D31, G21, J11, O33, O40

Received: 29.09.2024
Revised: 23.01.2025; 22.04.2025
Accepted: 09.05.2025
Published online: 13.05.2025

How to cite this paper: Imeraj, J., Hoda, N., Bica, K., Prenaj, V., & Gjoni, L. (2025). Exploring the impact and risks of fintech adoption on income inequality: A global cross-sectional study. Risk Governance & Control: Financial Markets & Institutions, 15(2), 92–102. https://doi.org/10.22495/rgcv15i2p8