The Squeezed Middle in Digital Financial Services: Ireland's Warning for European Consumer Protection Policy

This paper examines how digital financial services affect consumer welfare across income distributions using Ireland as a critical case study for European consumer protection policy. Our analysis of 11,128 Irish households from the 2020 EU Survey on Income and Living Conditions reveals that technology shows no direct association with consumer welfare (β=0.0022, p=0.969). Instead, it operates only through mediating channels that frequently fail for middle-income consumers. We identify a "squeezed middle" phenomenon where households between the 20th and 70th income percentiles experience persistent financial strain despite technology access. Young adults remain in negative financial well-being through the 70th income percentile despite 96.2 per cent technology access, suggesting structural barriers that technology cannot address. Immigration status creates the largest technology gap at 40.7 per cent, yet technology fails to explain welfare disparities between immigrants and natives. These findings from Ireland, where fintech adoption rates reach 71 per cent compared to the European average of 64 per cent, challenge the European Union's €150 billion digital infrastructure investment introduced on automatic consumer benefits. We identify three mechanisms explaining this failure: capability mismatch where technological resources exceed user capabilities, economic constraints override where fundamental economic barriers overwhelm technology benefits, and satisfaction illusion where technology increases perceived control without improving objective outcomes. As Europe's most digitalised economy, Ireland provides an early warning for other member states pursuing similar strategies. JEL Codes: D14, D18, G51, I31