Speakers
Description
Abstract
This study investigates the impact of FinTech adoption on traditional financial inclusion across ten emerging and less developed economies in Eastern Europe over the period 2010–2023. Unlike prior research that has mainly focused on other underdeveloped markets, this paper explores a unique blend of EU and non-EU countries capturing the heterogeneity of digital infrastructure, regulatory environments, and banking systems in the region.
Our findings reveal that FinTech adoption tends to reduce reliance on physical banking infrastructure (geographic access), while simultaneously enhancing demographic reach and reshaping the way financial services are used. The overall effect of FinTech on financial inclusion is found to be positive but uneven across countries, with structural and institutional variables playing a moderating role.
The study contributes to the growing literature on digital finance and offers practical insights for policymakers, central banks, and digital innovators aiming to promote inclusive financial systems in Eastern Europe.
Methodology
This study adopts a quantitative research approach to evaluate the impact of FinTech development on traditional financial inclusion across ten Eastern European economies during the period 2010–2023. The selected countries—Albania, Bosnia and Herzegovina, Bulgaria, Georgia, Moldova, Montenegro, North Macedonia, Romania, Serbia, and Ukraine—represent a mix of EU and non-EU states, post-communist transitions, and varying levels of financial infrastructure and digital readiness.
The analysis is built on two core components: (1) the construction of a multidimensional index of traditional financial inclusion, and (2) the estimation of the impact of FinTech adoption on this index using a dynamic panel econometric model.
To measure traditional financial inclusion, we extract data from the IMF Financial Access Survey (FAS), focusing on three key dimensions:
• Geographic access, measured by the number of commercial bank branches and ATMs per square kilometer
• Demographic access, measured by the number of bank branches and ATMs per 100,000 adults
• Usage, proxied by outstanding deposits and loans with commercial banks as a percentage of GDP
Each dimension is standardized and reduced using Principal Component Analysis (PCA) to construct a composite index per dimension, as well as an overall Financial Inclusion Index (FII). This technique ensures comparability and reduces the impact of multicollinearity among individual indicators.
FinTech adoption is measured using proxy variables sourced from the World Bank’s World Development Indicators (WDI), including:
• Mobile cellular subscriptions (per 100 people)
• Fixed broadband subscriptions (per 100 people)
• Individuals using the Internet (% of population)
These proxies reflect access to and engagement with digital financial tools, mobile banking, and internet-based financial services.
In addition to FinTech variables, we included control variables.
