Abstract

Financial inclusion is a shared ambition throughout the world. Over the past decade, with the rapid expansion of Internet Finance (IF) industry, China has seen a transformation of the accessibility and affordability of financial services, particularly for the formerly financially excluded populations. While the traditional financial institutions have improved their access channels, through the use of new technologies, IF has offered low-cost services to hundreds of millions of underserved people. Employing data of Ant Financial, the defining leader of the IF industry in China, this paper is one of the first attempts to depict the development of digital financial inclusion led by IF. By way of formulating an index, we characterize the development of China’s digital financial inclusion between 2011 and 2015 at provincial, city and county levels. Analysis of the index suggests that digital financial service provision is an effective means of promoting financial inclusion. Our results also highlight that digital financial inclusion can enable areas lagging behind in overall level of economic development to outperform economically advanced areas. Keywords: Internet Finance, Financial Inclusion, Index of Digital Financial Inclusion