Digital banking as a gender equalizer? Evidence from institutional quality thresholds

Previous research focuses primarily on the direct effects of digital banking on financial inclusion without considering the conditional role of institutional frameworks in shaping gender-specific outcomes. While substantial evidence demonstrates that digital financial services enhance overall financial access, the heterogeneous effects across different institutional contexts and their specific impact on gender disparities remain under­explored. We extend this literature by integrating digital banking adoption with institutional thresholds to examine whether digital banking serves as a gender equalizer in financial systems. For this purpose, we propose Hansen’s panel fixed-effects threshold model using annual data for 104 countries from 2014 to 2021 to examine the conditional relationship between digital banking adoption and gender disparity in financial inclusion across varying institutional quality levels. We find that in countries with weak institutional quality, a 1% increase in digital banking significantly reduces gender disparity in financial inclusion by 0.19 percentage points, disproportionately benefiting women who face barriers to traditional financial services. However, in countries with strong institutional quality, digital banking plays only a complementary role, with limited impact on closing gender gaps where women already enjoy broader access. We propose important policy implications suggesting that digital banking serves as a "great equalizer" primarily in countries with weak governance structures, enabling women to bypass traditional banking discrimination, while well-institutionalized economies require alternative strategies for gender inclusion.