Institutional Foundations of Digital Financial Inclusion: Governance, Financial Development, and Infrastructure Legacy in 38 OECD Countries, 2000–2022

Purpose: This paper examines what predicts digital financial inclusion among already high-income, well-governed countries, reversing the usual causal framing that treats inclusion as a driver rather than an outcome of institutional quality, financial sector development, and digital infrastructure legacy. Design/methodology/approach: Using a panel of 38 OECD countries (2000–2022, 874 country-years), account ownership and digital payment use are modeled as fractional response variables decomposed into within- and between-country components, with Tobit and Worldwide Governance Indicator cross-sectional robustness checks. Findings: Government effectiveness predicts inclusion almost entirely through persistent between-country differences, not within-country governance change. Early broadband rollout and submarine cable proximity independently predict higher digital payment use. This infrastructure-legacy result is weaker for account ownership and, per the actual-survey-year robustness, less robust for digital payment use as well. A conventional two-way fixed-effects specification, which cannot separate within- from between-country variation, finds no institutional relationship at all. Rule of law and regulatory quality carry most of this institutional effect, though political stability is also independently significant; voice and accountability is the weakest and least consistent dimension. Research limitations/implications: The decomposition establishes association, not causation; the governance-dimension check is cross-sectional rather than a full panel. The central institutional-quality result is robust to restricting the panel to actual, non-interpolated Findex survey-wave years (government effectiveness remains significant at p = 0.038 for account ownership and p = 0.011 for digital payment use, versus p = 0.026 and p = 0.001 on the full interpolated panel); however, one secondary infrastructure finding is not. Practical implications: The evidence here, which is associational rather than causal, is consistent with prioritizing digital payment infrastructure over governance reform as a short-run inclusion strategy, while continuing to invest in the rule of law for its longer-run structural payoff. Originality/value: The paper reverses the standard causal framing in the digital financial inclusion literature and combines five data sources within a single OECD panel not previously analyzed together.