FINANCIAL INCLUSION, TECHNOLOGY, AND INCOME INEQUALITY IN EUROPE

Abstract

This study investigates the impacts of fintech adoption, financial inclusion, and financial integration on income inequality in European countries. Utilising panel data from European nations and employing Generalised Method of Moments (GMM) regression models, we examine the relationships between these financial factors and income disparity levels. Our findings reveal that both fintech adoption and financial inclusion had strong positive effects on reducing income inequality. Further, financial integration in the European Union, measured by the adoption of the Euro currency in member countries, only had a modest, however significant effect of reducing income disparities. These results suggest that advancements in financial technology and improved access to financial services play substantial roles in mitigating income disparities across Europe. Consequently, financial policies that address income disparities across European Union should be more oriented at improving financial inclusion to the traditional financial system and create a better regulatory environment compatible with Fintech rather than simply promoting financial integration. The study contributes to the growing body of literature on the intersection of financial development and economic equality, offering important insights for policymakers aiming to address income inequality through financial sector initiatives.