Abstract
Within the evolving financial industry, characterised by the proliferation of FinTech and exacerbated by the Covid-19 , this paper investigates the unexplored relationship between financial, social, infrastructural factors and the level of digital financial divide (DFD) in Europe. Applying a difference-in-difference model, the study reveals that innovation in financial services correlates with a reduced DFD, further reinforced by improved digital infrastructure and social progress. However, the post-Covid environment has widened the gap in EU financially illiterate regions. Our results hold relevance for policymakers, governments, and supervisory banking authorities, indicating the most effective areas for intervention in lowering the country's DFD, but they could also support banks in the design of tailor-made digitalization strategies.
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