Fintech, Mobile Banking, and Financial Inclusion in Emerging Markets

Abstract

Financial technology (fintech)—the application of digital technology to financial services—has demonstrated remarkable potential to extend financial access to populations excluded from traditional banking systems, particularly in emerging markets where mobile phone penetration has outpaced bank branch infrastructure. M-Pesa’s transformation of financial services in Kenya—from a mobile phone company’s airtime transfer experiment to a ubiquitous payment, savings, lending, and insurance platform serving over 50 million customers across seven countries—is the canonical case study of fintech-enabled financial inclusion. This paper reviews the economics of fintech financial inclusion: the market failures that traditional banking cannot address, the mechanisms through which mobile financial services create welfare gains, the evidence from randomized and natural experiment evaluations of mobile money impacts, algorithmic credit scoring’s potential to extend lending to the credit-thin population, and the regulatory challenges of fintech financial inclusion including consumer protection, data privacy, and systemic risk.