From cash to code: FinTech’s dual role in reshaping Malaysian financial inclusion landscape

Purpose This study aims to investigate the dual role of FinTech in reshaping financial inclusion in Malaysia by distinguishing between traditional financial services and modern digital channels. It examines whether FinTech innovations complement or substitute traditional banking, and how this dynamic affects different population segments. Design/methodology/approach Using monthly data from January 2019 to December 2024, the authors construct three composite indices, General Financial Inclusion (FI), Traditional Financial Inclusion (TFI) and Modern Financial Inclusion (MFI), through Principal Component Analysis (PCA). The econometric analysis uses both Autoregressive Distributed Lag (ARDL) and Quantile ARDL (QARDL) models to assess the heterogeneous impact of FinTech across varying levels of FI. They also examine the moderating role of macroeconomic conditions such as economic growth and financial market activity. Findings Results indicate a dualistic impact: FinTech significantly enhances MFI through improved digital access and innovation but concurrently weakens the role of conventional financial services. The QARDL findings reveal that FinTech’s effects are not uniform, disproportionately benefiting higher inclusion quantiles. Moreover, the influence of FinTech is conditioned by macroeconomic variables, which either amplify or moderate its inclusivity. Originality/value This study introduces a novel dual-index framework for measuring FI by separately constructing the Traditional and MFI indices. It is among the first to empirically distinguish how FinTech affects each dimension differently. By applying QARDL, the study uncovers the heterogeneous and asymmetric nexus between FinTech and FI, offering a more profound understanding of digital finance’s role in reshaping access to financial services in emerging economies.