This study investigates the intricate relationship between shadow banking practices and financial inclusion in India, with a particular emphasis on the mediating role of consumer trust within the fintech ecosystem. As traditional banking systems struggle to serve the underserved and unbanked populations, shadow banking institutions comprising nonbanking financial companies (NBFCs), peer-to-peer (P2P) lending platforms, and digital credit providers have emerged as alternative financial service providers. While these entities have significantly expanded credit access, concerns regarding regulatory oversight, transparency, and data security continue to affect consumer confidence. Employing a quantitative research design, this study surveys 400 fintech users across major Indian urban and semi-urban centers. Structural Equation Modeling (SEM) is utilized to examine the direct and indirect effects of shadow banking practices on financial inclusion. The findings reveal that although shadow banking significantly promotes financial access, its impact is fully mediated by consumer trust. High trust levels amplify the positive effects of shadow banking on inclusion, whereas low trust levels diminish their efficacy. The study offers valuable insights for policymakers, fintech innovators, and regulatory bodies by highlighting the need to build and maintain consumer trust through transparent practices, ethical data usage, and strengthened governance. Strengthening trust mechanisms is crucial for leveraging the full potential of shadow banking in bridging financial inclusion gaps in India’s diverse economic landscape.