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DIGITAL FINANCIAL LITERACY: THE ROAD TO DIGITAL PAYMENT

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DIGITAL FINANCIAL LITERACY:
THE ROAD TO DIGITAL PAYMENT

ANJALI MANDAL
School of Business Studies, Sharda University
Dr. GARIMA MADAAN DUA
School of Business Studies, Sharda University

Published By: KAAV PUBLICATIONS

ISBN: 978-93-91842-25-3

Cite as: Mandal, A Dua, G.M (2021). Digital Financial Literacy: The Road to Digital
Payment (pp.1-9) Digital Disruption & transformation- A Multidisciplinary Perspective.
India:Kaav Publiction
 Digital financial literacy: the road to digital payment
INTRODUCTION
The Lives of people went easy when digitalization came into existence, now
anything one can buy and sell with one click on a phone or laptop. Digital payments are
payments that happen entirely digitally or online, without the need for a tangible exchange
of money. This means that both the provider and the recipient exchange money via
electronic means.

The Indian government has taken a number of steps to promote and support digital
payments in the country. The government's goal for the 'Digital India' campaign is to
establish a 'digitally empowered' economy that is 'Faceless, Paperless, Cashless.' According
to data, India reported 53 billion Indian rupees in digital payments in fiscal year 2021. It is
interesting that digital transactions have climbed from 20.7 billion rupees in 2018 to 53.55
billion rupees in 2021, a significant increase (Statista, 2021). Digital payment comprises of
different means given in below table

Sr. No. Variety of digital Description

payment transaction

1 Immediate payment It can be accessed via basic mobile phones, smart phones,
system (IMPS) the internet, and ATMs

2 Unstructured The service is compatible with all GSM handsets and

supplementary service service providers.
data (USSD)

3
National electronic fund Individuals, corporations, and organizations having bank
transfer (NEFT) accounts can electronically transfer funds to any account.

4 Real-time gross The RTGS system is designed for high-value transactions.

settlement (RTGS)

5 Prepaid payment Individuals and organizations may use pre-paid payment

instrument (PPI) channels to pay for services, goods, and financial services.

6 Unified payment Banks should connect in order to facilitate fund transfers.

interface (UPI)

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 Digital Disruption & Transformation- A Multidisciplinary Perspective

7 Mobile banking Using a browser or an app, you can access your bank
account.

8 Mobile wallets Popular mobile app-based digital payment system. Paytm,

HDFC PayZ and ICICI Pocket are other examples.

9 Aadhar-enabled Biometric authentication is used throughout the payment

payment system (AEPS) system

10 BHIM A UPI-based system that allows money to be transferred

simply by dialing a phone number

11 Credit card/debit card Transferring money with a credit card

(Source: Sivathanu, 2018)

Prime Minister Narendra Modi took a major decision in 2016 to phase out the use
of the Rs. 100 and Rs. 500 notes, causing a significant shift in the economy. From small
vendors to large corporations, everyone was concerned about how things would turn out.
Then came the digital payment revolution, and everyone began to go cashless.

There are distinct benefits to using digital payment.: they are simple and
convenient to use, you can pay and send money from anywhere, you can save money on
taxes, you can keep track of your transactions simply, and they are less hazardous. But
digital payment also has a negative side. Non-technical people may find it difficult to
comprehend, there is a chance of overspending, and there is a possibility of data theft
(Sivathanu, 2018). Increased usage of digital payment needs a higher level of digital
financial literacy (Morgan [Link],), which make an individual safe transaction and help them
to avoid frauds and miss understanding like hacker threats, phishing, illegal use of data
etc. This study is primarily concerned with two research questions.

RQ1: How common are digital payment transactions among Indians?

RQ:2 Why digital financial literacy is required to make those payments simple and secure?

OBJECTIVE
India is the world's second most populous country, accounting for 17.7% of the
global population. (Worldometer, 2021). According to a report India 's financial literacy is
24% which is very low compared to developing nations (FinLit survey 2015). With this low
financial literacy, how digital payment has flourished in India would be the main concern

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Digital financial literacy: the road to digital payment
of this study. Financial literacy is defined as the capacity to comprehend financial matters
and apply that knowledge to make sound financial decisions that benefit one's financial
well-being (Prasad et. al,). Digital payment is both quick and easy, but it can also be riskier
if not handled properly. During the pandemic, phishing attacks increased in 83 percent of
Indian organizations (Livemint, 2021). This also demonstrates that digital payment is both
a curse and a boon. We need some knowledge and awareness to properly use and handle
digital payment. The study's key concern would be the relationship between these two
variables, namely, digital payment and digital financial literacy.

RESEARCH METHODOLOGY
The research relies on secondary sources such as journals, books, news items, and
blogs. The study explains the importance of digital financial literacy and its consequences
for the vulnerable population. The article then goes on to describe how digital literacy,
when combined with financial literacy, results in digital financial literacy and has an
impact on digital financial services. It also discusses how financial literacy in the digital age
can pave the way for secure online payments.

LITERATURE REVIEW
In 2015, Prime Minister Narendra Modi launched the Digital India campaign,
which aims to raise awareness about the benefits of going digital across the country (Joshi,
2017). "Faceless, Paperless, Cashless" is the proclaimed role of Digital India. The
government has introduced various kinds of digital payment systems to enable cashless as
part of the Digital India Campaign. A few traditional and new forms of payment were
encouraged as part of the digital payment system in order to establish a cashless economy,
which is critical for developing countries like India today.

Initially digital payments were not very popular in India but they grew in
popularity over time. The value of digital transactions has climbed from 20.7 billion rupees
in 2018 to 53.55 billion rupees in 2021, which is a significant increase (Statista, 2021).
Demonetization (Joshi, 2017) and covid -19 (Bijapurkar et al. 2020) are the two key reasons
for growing digital payment.

In 2016, India's Prime Minister announced demonetization, a complete ban on the

Rs. 500 and Rs. 1000 notes in order to eradicate black money from the country (Singh, 2017).
This forced people to do digital transactions, restaurants, small shops, cabs, auto rickshaw,
small vendors all going to think cashless. People not of their own will but forcibly change
their behavior and try to adjust with digital transactions. India with a huge population has
a good source of digital transactions i.e. is smart phones. The country is expected to use 748
million smartphones by 2020 (Statista, 2021), which means that anyone with a smartphone
can easily conduct digital transactions.

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 Digital Disruption & Transformation- A Multidisciplinary Perspective
Following demonetization, Covid-19 struck India, putting the country on
lockdown. People are increasingly conscious of digital transactions, and all transactions
from online to offline, are now conducted digitally. People from various backgrounds
somehow manage to do digital transactions, although initially they were not in favor of
digital transactions.

Digital transaction has its dark side also (Sivathanu, 2018) from difficulty to understand to
become a victim of fraud. Apart from these digital transactions need a good internet service
which is missing in many parts of India especially in rural part of the country, which also
becomes a big problem for digital transactions. On the path to digital payment, a number
of issues occur, including transaction costs, cybercrime, communication infrastructure,
adoption, and awareness (Aggarwal et, al., 2021). Improved digital financial literacy
necessitates effective use of technology, and it has become an increasingly significant part
of digital age education (Morgan [Link], 2019). According to studies, education is one of the
factors influencing digital payment (Singh and Rana, 2017). Digital financial literacy ushers
in the digital era and will benefit people's financial well-being.

Digital Financial Literacy Needs of the Hour

Financial literacy (OECD, 2016) is a combination of knowledge, skill, attitude, and
behavior that makes financial information more meaningful, resulting in effective financial
inclusion and financial well-being for a better life. Digital financial literacy is an old wine
with a new bottle, people are moving towards the digital age globally. Change is the need
of the hour, financial literacy and digital financial literacy are interwoven, one can lead to
the another. The fast growth of digital financial services, which promises to increase
financial inclusion and personal financial management, has thrown up a new challenge:
tying financial literacy to digital literacy and evaluating their dual impact on financial
outcomes (Lyons and Hanna, 2021). Today‘s digital financial services are fast expanding,
and digital literacy has combined with financial literacy to create digital financial literacy
(Lyons and Hanna, 2021). In the fiscal year 2021,

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Digital financial literacy: the road to digital payment

Financial
Literacy Payments

Digital Digital Asset Management

Financial Financial
Literacy Service Alternative Finance

Digital Others
Literacy

(Source: Author)

Covid-19 sparked a surge in digital financial literacy, which has since become a
need, and people have to unwillingly or willingly have to do digital transactions.
Particularly vulnerable populations that are less aware of the digital age benefit from
digital financial literacy since it allows them to conduct secure transactions and gradually
become accustomed to them.

Digital Financial Literacy and Vulnerable Population

The demand for growth and development is vital. Information technology is
continually evolving, but it is becoming more difficult for a vulnerable population to gain
access to it, resulting in a digital gap (Chang [Link],). Small vendors, rural residents, the
elderly, uneducated people, grocery store owners, and others are unable to transact
digitally as they have less knowledge and opportunities. People are becoming victims of
the digital world, and because digital transactions are conducted in English, understanding
and accumulating information has become a difficult task. This vulnerable demographic
requires additional and tailored education in order to comprehend the digital environment.
Digital financial literacy is a necessary component for the vulnerable population to make
digital payments, as it will enable them to take advantage of technology and conduct
transactions safely and easily.

Digital Financial Literacy: The Road to Digital Payments

A number of factors are assisting the growth of digital payments and the transition
from cash to a cashless economy (Singh and Rana, 2017). Examples of these facilitators
include the availability of internet access on smartphones, non-banking financial
organizations helping digital payment, one-touch payment, the rise of the financial
technology sector, and government pushes, either through incentives or tax breaks. All of
these factors are producing a favorable atmosphere in India for the growth of digital

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 Digital Disruption & Transformation- A Multidisciplinary Perspective
payments. India recorded approximately 44 billion digital payments. This represents an
increase over the previous three years.
50
45
40
35
30
25
20
15
10 5
0
2018 2019 20202021

(Source: Statista, 2021)

On the other side of the coin people have a limited understanding of digital
payment. Of course, it becomes popular in a short period of time, and individuals in need
take advantage of it, but it has a negative impact on their financial situation as people are
not well versed about it. Digital financial literacy will make things easy and safe.

People with digital financial literacy will be better informed about the benefits and
drawbacks of any financial service, including digital payments (Morgan, 2019). It will assist
individuals in avoiding a variety of risks such as phishing, pharming, spyware, and sim
card exchange. It provides digital financial risk control, educating users on how to protect
themselves from risk and providing information on consumer rights and redress processes
in the chance that they fall victim to any of the risks listed above.

CONCLUSION
Moving forward, India faces a tremendous challenge in expanding and
operationalizing the body of digital knowledge in both existing and emerging generations.
In this study light has been thrown on the problems faced by the vulnerable population of
India in understanding and safely handling digital payments. Despite the negative effects
of demonetization and the Covid 19 outbreak on the economy, digital services have proven
to be a lifeline in this crisis. People's lives are heavily reliant on dealing with money, and

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Digital financial literacy: the road to digital payment
they should be fully aware of and knowledgeable about digital financial services in this
situation.

The government is responding by launching a number of initiatives, including the

Pradhan Mantri Gramin Digital Sakshrtra Abhiyan (PMGDIKSHA) and Vittiya Saksharta
Abhiyaan (VISAKA). "Cash is king, but digital is Divine." The Reserve Bank of India (RBI)
depicts India's financial structure in this fashion in its most recent assessment, highlighting
the country's growing reliance on both cash and digital payments (Anjali and Garima 2021).
The government should implement digital financial literacy programs in schools and
colleges to educate students about digital financial data and how to manage it properly,
especially in rural areas.

Individuals should also take the initiative to learn about digital payments and participate
in various government programs that provide education and awareness about digital
financial services. They can learn about digital financial services by visiting trustworthy
websites, reading the news, and reading journals. Together, we can overcome any obstacles
in the digital world's road and securely arrive at our destination.

REFERENCES
• AGGARWAL, K., MALIK, S., MISHRA, D. K., & PAUL, D. (2021). Moving from Cash to
Cashless Economy: Toward Digital India. The Journal of Asian Finance, Economics and
Business, 8(4), 43-54.
• Bijapurkar, R., Rai, P., Shukla, R., & Sachdeva, V. (n.d.). Digital payments adoption in India,
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[Link]
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• Chang, B. L., Bakken, S., Brown, S. S., Houston, T. K., Kreps, G. L., Kukafka, R., ... & Stavri, P.
Z. (2004). Bridging the digital divide: reaching vulnerable populations. Journal of the American
Medical Informatics Association, 11(6), 448-457.
• India population (live). Worldometer. (n.d.). Retrieved November 25, 2021, from
[Link]
population/indiapopulation/#:~:text=India%202020%20population%20is%20estimated,1%2C
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• Joshi, M. (2017). Digital Payment System: A Feat Forward of India. Research Dimension
(ISSN: 2249-3867).
• Klapper, L., Lusardi, A., & Van Oudheusden, P. (2015). Financial literacy around the world.
World Bank. Washington DC: World Bank.

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 Digital Disruption & Transformation- A Multidisciplinary Perspective
• Livemint. (2021, September 20). 83% organizations in India saw rise in phishing attacks during
pandemic. mint. Retrieved November 22, 2021, from
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• Lyons, A. C., & Kass Hanna, J. (2021). A methodological overview to defining and measuring
―digital‖ financial literacy. Financial Planning Review, e1113.
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