From Access to Usage: Household-Level Dynamics of Digital Financial Inclusion in India and China

Abstract

The influx of digital payment systems is revolutionising the way households access finance; Digital Financial Inclusion (DFI), thus, is no longer just a development goal but a behavioural outcome moulded by the socio-economic status as well as household banking habits. This study explores how socio-economic characteristics and financial behaviour shape household access and use of DFS (Digital Financial Services) in India and China. Using the household-level Global Findex Survey data, this paper tests the eight hypotheses through logistic regression. The results indicate that education, income, age, and gender play a significant role in influencing adoption and application of DFS in both countries. In India, provision and use of DFS were greatly benefited by higher education, higher income and being an old "saver borrower". However, households headed by females who are old have least rates of access or usage of DFS or DFI. Similarly, in China, it is seen that higher education, income, savings, and borrowing are significantly associated with improved access and usage of DFS. Consistency with the propositions considered in this paper would be that more elderly people present in household structurally restrict DFS access and usage in DFI. Majority of the evidence from this study lay the ground for recommending that banking behaviour—mainly past savings and loan history, acts as a strong catalyst for both DFS access and usage in both countries. The results point to the need for financial inclusion and payment system initiatives tailored to socio- economic and behavioural gaps and improving channels that can help induct households into formal banking to build an inclusive digital financial ecosystem. The study carries valuable significance in the Indian-Chinese context since it provides a rare parallel at the household level and comes through with new empirical evidence on how behavioural and socio-economic forces indeed mix to shape digital inclusion outcomes.