Fintech-Based Payment Systems and Financial Inclusion in Pakistan: The Mediating Role of Digital Financial Literacy and the Moderating Role of Trust

Abstract

The role of technology is increasing every day globally, and so is its involvement in the banking sector as well. Whether it is about receiving quick and hassle-free payments, receiving funds, and paying bills, banks are working and investing significantly to make things smooth and seamless to gain a competitive edge. Knowing the significance of the technology in financial literacy, this study has been designed to investigate the influence of financial based technology which is known as fintech payment systems on financial inclusion so as to further strengthen the formal economy and improve banking experience in Pakistan. Further, this study also includes mechanisms and involves digital financial literacy, which has a mediating role in the proposed model of this study and the moderating role of users' trust. Using regression-based path analysis with Hayes' PROCESS Macro model, this cross-sectional study employs a quantitative design and collects data from 385 fintech users, who also constitute the study sample, through a structured questionnaire. IBM SPSS 26^th version software was used, and the PROCESS Macro model plugin was used for data analysis to test simple linear regression, mediation and moderation path tests of the model. It was found that fintech use significantly increases digital financial literacy, which positively affects the ultimate variable, which is financial inclusion. Nevertheless, trust's moderating effect on the link between fintech adoption and financial inclusion is statistically positive but insignificant. This study fills an existing gap in the literature by providing a behavioral-technology-based explanation for fintech-induced financial inclusion in developing countries. The findings underscore the role of digital financial literacy as a primary means whereby fintech drives meaningful impact. The findings offer imperative practical implications for policymakers and fintech providers, highlighting the need to strengthen financial literacy in the digital world. These measures can support the development of more accessible, equitable and inclusive financial systems in the country. This paper also lays the groundwork for future studies to examine additional moderating variables, including financial technology adoption and efficacy.

        Keywords: fintech, financial inclusion, trust, financial literacy.