The study investigates how credit card access affects income inequality in 30 developing countries from 2000 to

2024 through the mediating roles of financial inclusion and digital payment adoption. A panel fixed-effects

mediation model was used to estimate direct and indirect effects, with clustered robust errors. To address

endogeneity and dynamic persistence, the Arellano-Bond dynamic panel Generalised Method of Moments served

as a robustness check. Indirect effects were validated using bootstrapped standard errors with 5,000 replications.

The findings indicate that the expansion of credit card access considerably improves both financial inclusion and

the adoption of digital payments, thereby promoting a more comprehensive engagement with formal financial

systems. By empowering lower-income households, increasing access to financial services, and reducing

payment platforms targeting underserved populations. For future research, studies could extend the analysis to

micro-level or household data to capture individual behavioural patterns and heterogeneity in credit card usage.

Over the past two decades, developing nations have witnessed profound shifts in their financial systems, driven

largely by rapid technological advances and policy reforms aimed at expanding access to finance. The

proliferation of mobile phones, internet connectivity, and fintech innovations has created new opportunities for

individuals and firms to engage with the formal financial sector (Alnasser Mohammed, 2025; Fu and Liu, 2023).

In particular, digital finance has acquired popularity as a means of reducing the barriers to economic participation.

The unbanked and underbanked have been able to perform transactions, save securely, and access credit with

greater ease as a result of the availability of services such as mobile money, e-wallets, and online lending

instrument for poverty alleviation and inclusive growth (Khalil et al., 2025). However, despite these advances,

income inequality remains a stubborn feature of many developing economies. Structural divides such as urban-

rural disparities, limited financial literacy, weak institutional capacity, and gender gaps continue to exclude

significant populations from equitable participation in financial markets (Abdul Mannan and Farhana, 2023).

This juxtaposition of expanding financial tools such as credit cards, digital platforms, and innovative payment

systems against persistent inequality raises pressing questions: are such innovations genuinely fostering inclusive

development, or do they risk deepening socio-economic divides by disproportionately favouring already

advantaged groups? (Bhatia and Dawar, 2024; Coffie et al., 2020).

While the literature on financial inclusion and digital finance has grown substantially, notable gaps remain,

particularly concerning the specific role of credit card access within the broader inclusion-inequality nexus. Prior

participation in digital transactions, but they also expose vulnerable groups to risks of over-indebtedness, high

interest charges, and potential exclusion if stringent eligibility criteria persist (Nguyen, 2023; Shehadeh et al.,

2025). Digital payment adoption, meanwhile, has been acknowledged as a driver of efficiency, transparency, and

access, yet its interaction with credit card access has not been adequately theorised or empirically tested (Rasheed

et al., 2025; Wang and Fu, 2022). In developing contexts where institutional capacity, regulatory oversight, and

digital literacy vary widely, the pathways through which credit card access influences inequality are likely to be

mediated by these factors (Haider et al., 2024; Pandey et al., 2022). For instance, while access to credit cards may

empower middle-income households to integrate more fully into digital economies, low-income groups without

the infrastructure or knowledge to adopt digital payments may be further marginalised. Conversely, in contexts

where digital payment systems are widespread and user-friendly, credit card access may amplify financial

inclusion by facilitating integration into formal economic systems. Despite these possibilities, current scholarship

adoption. Addressing this objective is crucial, as credit cards represent both an opportunity and a risk for low-

and middle-income populations. For policymakers, understanding whether credit card access narrows or widens

income inequality has profound implications for designing inclusive financial strategies. For financial

institutions, insights into these dynamics inform product innovation, risk management, and market expansion in

underserved regions. At a broader level, unpacking this nexus contributes to debates on how digital financial

transformation can be leveraged to achieve equitable growth in emerging markets, aligning with global

development goals such as poverty reduction and financial democratisation.

The study uses the Financial Intermediation Theory, proposed by Gurley and Shaw in 1960, which posits that

financial institutions act as crucial intermediaries in mobilising savings, allocating credit, and facilitating

economic growth (Mishra et al., 2024). This theory emphasises how access to formal financial products reduces

theory warns that disparities can be further entrenched by unequal access to financial intermediation, as groups

study conceptualises credit card access as a potential generator of financial inclusion, but also as a mechanism

this logic. Since financial intermediation theory posits that resource allocation efficiency can be improved by

payment adoption is particularly relevant in this context (Mishra et al., 2024). Therefore, the framework

establishes a foundation for investigating the extent to which credit card access influences the adoption of broader

digital finance to promote equitable outcomes in developing countries.

The study also draws on the Capability Approach, proposed by Sen in 1999, which frames development not

merely in terms of income but as the expansion of individuals’ substantive freedoms and opportunities (Vasile et

al., 2021). Access to financial resources is emphasised in this theory as a critical enabler of capabilities, including

the capacity to manage risks, pursue long-term objectives, and partake in markets. In this view, financial inclusion

enhance human agency (Jena, 2025). Credit card access, when distributed equitably, can thereby improve

capabilities by enabling households to access new opportunities, manage consumption disruptions, and

participate in digital economies (Byegon, 2020). In contrast, capability deprivation may be exacerbated by

unequal or exclusionary access, particularly if vulnerable groups are excluded as a result of stringent eligibility

criteria, low digital literacy, or insufficient institutional support (Mishra et al., 2024). By integrating the financial

the study with broader debates in development economics and financial services research.

Credit card access has emerged as a key aspect in discussions of financial development, as it reflects both the

potential benefits and the exclusionary aspects of contemporary financial intermediation. From the Financial

Intermediation Theory, broadening access to credit instruments allows households to stabilise consumption,

invest in human capital, and engage in productive economic activities that foster inclusive growth (Peng and

Mao, 2023). In this context, credit cards function both as a payment method and as a provider of short-term

unsecured credit, enabling individuals to address liquidity limitations and participate in digital transactions that

may bolster financial stability. Empirical research further indicates that expanded access to credit and digital

credit institutions (Wu et al., 2023). Research further demonstrates that credit card limits, reward programs, and

interest rate advantages are predominantly concentrated among affluent users, who receive a disproportionate

share of financial benefits, while vulnerable consumers encounter higher interest charges, penalty fees, and

increased risks of over-indebtedness (Karlan et al., 2022; Alvarez and Opoku, 2023). These mechanisms establish

a direct, inequality-enhancing pathway through which access to credit cards reinforces socio-economic

stratification, even when mediated channels such as financial inclusion and digital payment adoption produce

inequality-reducing effects. Accordingly, this study proposes the following hypothesis:

Credit card access is increasingly recognised as a critical pathway for strengthening financial inclusion in

and Jiang, 2022). Guided by Financial Intermediation Theory, credit cards reduce transaction costs, broaden

liquidity, and facilitate secure participation in regulated financial systems, providing households not only with

transactional convenience but also short-term unsecured credit that enables digital commerce, consumption

while Hiew et al. (2025) demonstrate that such digital products strengthen the inclusion of underserved groups.

Nonetheless, access remains unequally distributed, disproportionately favouring affluent and urban populations,

et al., 2022). From a Capability Approach perspective, credit cards can enhance financial agency and well-being,

but only when supported by equitable access conditions and consumer protection mechanisms. Overall,

theoretical reasoning and empirical evidence confirm that credit card penetration strengthens financial inclusion

by increasing formal account use, savings, borrowing, and digital transaction participation, leading to the

hypothesis that.

H2: Access to credit cards is positively associated with financial inclusion in developing economies.

Financial inclusion has been widely theorised as a mechanism for reducing income inequality by expanding

enhancing access to formal markets and generating new opportunities for small businesses to engage in e-

commerce (Amofah and Chai, 2022; Nam et al., 2023). However, research also warns that these advantages may

be restricted by unequal access to digital infrastructure or digital literacy, which could result in rural and low-