Status and Determinants of Digital Transactions in India: Findings from the New Global Findex Database

Abstract

Promoting digital transactions is an announced policy priority of the Government of India. Such transactions can be comprehensively monitored and hence reduce leakages in the government’s direct benefit transfers, curb circulation of fake currency and track unaccounted transactions. A digital payment environment reduces the operational costs of the financial system. In this background, understanding the current status and progress of digital transactions has crucial importance for the monetary authority of a country. Using the bank-level information from RBI, this study examines the progress of digital transactions in India in recent years. Also, the latest round of the Global Findex Survey provides information on the access and usage of digital payment instruments at the individual level. Using this information, this study identifies the factors influencing individuals’ adaptation to digital transactions in India through the estimation of logistic regression models. It is found that the number of digital transactions in India has increased almost eight-fold during the last six years. The Findex database for India revealed considerable disparities in adaptation to digital transactions among individuals belonging to various socio-economic categories. A significant gender gap is also detected in digital transactions. Income and education have turned out to be significant positive contributors to digital transactions. Regression results suggest that waiving convenience fees for digital payments, special schemes for women's digital financial inclusion, promoting universal basic education and facilitating access to the internet in remote rural areas can increase the share of digital transactions in India.