Artificial Intelligence Fintech and the Interaction between Digital and Traditional Finance in Expanding Financial Inclusion among Underserved United States Communities (American Journal of Financial Technology and Innovation)

Summary

• Financial exclusion affects over 22 million unbanked and 47 million underbanked adults in underserved communities in the United States.p.2
• Unbanked households spend an average of $189 a year in transaction costs alone.p.4
• According to the FCC, approximately 21.3 million Americans lack access to broadband internet at required speeds.p.6
• The baseline linear model demonstrates that the AI-FinTech Penetration Index has a positive impact on financial inclusion with a coefficient of 0.412.p.13
• A panel threshold regression identifies a non-linear threshold effect at an AI-FinTech Penetration Index value of 0.387.p.14

Key insights

1. AI-FinTech penetration has a statistically significant positive effect on financial inclusion across underserved US census tracts.p.13
2. A structural threshold exists at an index value of 0.387, beyond which marginal inclusion returns from AI-FinTech adoption start to diminish.p.2
3. Digital AI-FinTech platforms and traditional financial institutions function as complements, creating a multiplicative positive effect on inclusion.p.2
4. Broadband access is a critical precondition for financial inclusion, where a 10-percentage-point expansion correlates with a 0.019-unit improvement in the Financial Inclusion Index.p.13
5. Disparities persist in financial access, with 36.7% of Black households and 28.1% of Hispanic households being unbanked or underbanked compared to 7.2% of White non-Hispanic households.p.4
6. AI-driven credit underwriting models using alternative data approved 43 percent more loans for Black and Hispanic borrowers compared to conventional FICO-based models at the same risk profile.p.15
7. Neobank Chime reported that 43 percent of its customer base had no existing bank account prior to opening a Chime account.p.16