Determinants of Digital Technology Adoption and Financial Inclusion in India

In 2014, with the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY), a flagship programme of the Narendra Modi government, financial inclusion became a development priority for policymaking in India. PMJDY promotes financial inclusion by enh­ancing access to bank accounts and digitising financial transactions, including the payment of welfare benefits through direct benefit transfers (DBT). Over the last few years, advancements and innovations in digital technology have helped solve the last-mile problem of reaching account holders in the remotest parts of the country.¹ Therefore, it is imperative to examine digital technology adoption for doing financial transactions in India. The existing literature on financial inclusion in the ­Indian context offers scant evidence on the uptake of digital technology. Moreover, there is a dearth of studies that analyse the determinants of digital technology adoption. This paper fills these gaps in the ­related literature by examining the impact of PMJDY on digital technology adoption across states in India. I further identify some factors that determine the usage of digital technology platforms by adults having bank accounts in the country.

I do not find any evidence of a significant improvement in the adoption of digital technology platforms among Indian adults across states in 2015, following the institution of PMJDY. However, having access to a smartphone and mobile internet was found to positively impact the utilisation of digital technology. Furthermore, I observe evidence of a gender gap in the usage of digital technology. My results results show that adults with higher levels of education and salaried jobs are more likely to adopt digital technology. My results also suggest a digital ­divide between poor and non-poor adults and among adults living in urban areas and their rural counterparts.