Fintech innovation: Is it beneficial or detrimental to financial inclusion and financial stability? A systematic literature review and research directions

Notwithstanding the financial innovations of the digital era, globally, 1.4 billion people are still excluded from the formal financial system, thus precluding them from achieving financial health and wellness. Financial innovations, such as financial technology or fintech, have gained increasing global attention as powerful tools for financial inclusion and socioeconomic development. In this study, we explore the potential of technologically-enabled financial innovation to bring unbanked segments of society into the formal financial system and the repercussions of such innovation on financial stability during the pandemic. However, the excitement around fintech has also masked its risks to the financial system and low-income people. We analyze the interrelationships among fintech, financial inclusion, and financial stability through a systematic literature review of 163 academic articles published between 2010 and 2023. We seek to fill the knowledge gaps in these subject areas by (1) mapping the fintech-driven financial inclusion field, (2) synthesizing the findings to develop a conceptual framework, and (3) discussing theoretically sound future research directions. This study is related to innovation with a focus on finance, contributing to a small but growing literature on the role of inclusive innovation and fintech-driven financial inclusion in promoting inclusive development and poverty alleviation, particularly in emerging economies. We also explore the potential effects of the COVID-19 pandemic and the interactive roles of financial capabilities and regulatory and supervisory frameworks in the interrelationships above.