Determinants and Mechanisms of Digital Financial Inclusion Development: Based on Urban-Rural Differences

The combination of digital finance and financial inclusion can better meet the needs of those who have little access to financial services. This paper investigated the differences in the determinants and mechanisms of digital financial inclusion development between urban and rural areas. The sample consists of 1607 counties in China from 2014 to 2019, and uses the fixed-effect model and panel threshold technique. The empirical results indicate that: (1) The industrial economy and governmental intervention are the common determinants of urban and rural digital financial inclusion development, in which the degree is different. At the same time, secondary education is only a determinant in rural areas. (2) Industrial upgrading and indirect finance play a mediating role in the determinants of digital financial inclusion, but indirect finance is only significant for urban areas. (3) There is a threshold effect in the financial development-digital financial inclusion relationship. Under different financial development levels, the determinants of urban and rural digital financial inclusion show the discrepancy. With the development of digital financial inclusion under the trend of promoting innovative digital finance in China, these findings are expected to enhance access to financial services in urban and rural areas for more inclusive and sustainable futures.