Financial inclusion effects of engaging with the fintech ecosystem

Using the FinAccess Kenya Household Survey dataset, we construct a metric of individual engagement with the fintech ecosystem and examine its linkage with consumption of traditional financial products. Deploying a battery of econometric procedures, we document a pervasive gap in the usage of traditional financial products, ranging from 5.3% to 17.5%, between individuals who engage with the fintech ecosystem and those who do not. Treatment-effects procedures yield evidence that engaging with the fintech ecosystem improves individuals’ usage of traditional financial products by about 4 percentage points. The positive impact of the fintech ecosystem on the usage of traditional financial products is enabled by fintech mitigating the distance barrier. Interestingly, our findings suggest that the fintech ecosystem does not perform well in addressing financial inclusion inequalities facing young adults, women, the less educated and less wealthy people. We offer policy guides and future research suggestions anchored on these findings.