Impact of Fintech Use on Financial Inclusion with Mediating Role of Digital Financial Literacy: A Case of Fintech Users in Pakistan

Abstract

This study investigates the impact of trust, service quality and perceived security on use of FinTech services and digital financial literacy role as a mediator between the use of FinTech services and financial inclusion in Pakistan. A quantitative and cross sectional survey methodology is applied in this study. Data were collected from FinTech users in Pakistan using structured online questionnaire adopted from Amnas et al. (2024) and other validated resources. 206 complete responses were received by employing convenience and snowball sampling; The recommended sample size by G*Power was 138, which ensured good statistical power. The measurement tool had six constructs: trust, service quality, perceived security, FinTech usage, digital financial literacy, and financial inclusion. The data were analyzed by Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS version 4.0. To test reliability and validity of the measurement model, Cronbach's alpha, composite reliability, average variance extracted (AVE) and discriminate validity were used. Analysis found that trust and perceived security have significant positive effects on FinTech usage, whereas service quality shows a positive but insignificant effect. Fintech usage has a huge impact on financial inclusion and had a strong effect on digital financial literacy. Digital financial literacy also had a positive effect on financial inclusion and partly mediates the correlation between FinTech usage and financial inclusion. These findings indicate that the contribution of FinTech in financial inclusion in Pakistan is not limited to technological availability but also to user trust, perceived security and digital financial literacy. The research can offer viable recommendations to FinTech companies to enhance trust and security frameworks and policy makers and educators to foster digital financial literacy, particularly among underserved groups, to ensure sustainable financial inclusion.