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Conference on e-Business, e-Services and e-Society

I3E 2017: Digital Nations – Smart Cities, Innovation, and Sustainability pp 61–70 Cite as

Digital Payments Adoption: An Analysis of Literature

• Pushp P. Patil 28 ,
• Yogesh K. Dwivedi 28 &
• Nripendra P. Rana 28  
• Conference paper
• First Online: 04 October 2017

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Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 10595))

Digital payments (mainly enabled by mobile devices) have huge potential to change lives of millions of people in developing countries by offering financial services to the unbanked masses. Despite its potential digital payment methods have not been widely and successfully adopted in the developing countries. In order to ascertain the various drivers and inhibitors behind digital payment adoption, this study did a review of research on digital and mobile payment adoption and use. Results of this literature analysis revealed performance expectancy/perceived usefulness as most significant determinant of consumer’s behavioral intention to use mobile payments followed by perceived ease of use (PEOU). Perceived risk was found as major inhibitor to the adoption of mobile payments. Also majority of studies employed TAM and its extension to understand consumer adoption to mobile payment followed by UTAUT.

• Cashless payments
• Digital payments
• Literature review
• Mobile payments

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1 Introduction

Internet has changed the way business is conducted in recent years in terms of wireless communication. This emerging trend is more powerful than anything internet used to offer before as this allows consumers an anywhere and anytime paradigm [ 1 ]. In the history of mankind no other innovation has influenced the lives of people in ways as Mobile devices [ 2 ]. These hand held devices have gradually shifted daily activities from real world circumstances to mobile phone-based virtual world. In the entire consumer technology adoption history the rate of adoption of Mobile phone was the fastest and to the deepest level [ 3 ].

The global spread and use of mobile devices provide prominent role to digital payments in the payment market. This wide penetration of mobile devices bring world of opportunities to transform the manner in which people manage and move money through secure mobile transactions [ 4 ]. Consumers are slowly moving towards changing their payment method from traditional ways to contactless devices due to emergence of these new mobile and other digital payment technologies. The rapid development in technology has enabled innovation in payment methods resulting in applications such as Near Field Communication (NFC), mobile wallets, P2P apps, quick response code and wearable [ 5 ].

Despite their popularity as an emerging service mobile payments have not as widely adopted as expected in the developing countries [ 4 ]. This could to attribute to the fact that in the developed countries Mobile Payment systems have to compete with range of alternative payment methods with longstanding history [ 6 ]. However, the scenario is quite different in the emerging markets. Mobile Payments are readily accepted in the countries like Kenya and Philippines where penetration of formal banking system is low [ 7 ].

Given the background, it is undoubted mobile payments have potential to bring financial inclusion especially in the emerging markets by offering financial services to the unbanked masses and improve their lives for better. Recently there have been huge drives to promote various digital payment systems including mobile payments by Government of India (GoI) for enhancing transparency in financial transactions, reducing tax envision and improving public welfare and delivery systems. GoI has not only made variety of digital payment systems available to cater need of all segments (affluent vs. non affluent; rural vs. urban) of society, but widespread training and financial incentives also offered to equip and encourage people to use these systems. Despite the advantages of digital payment systems and widespread promotion there is reluctance among consumers to use various digital payment systems including mobile payment not only in India but also in other countries. This provides motivation and relevance to undertake research in this area. An examination of existing literature suggest that a number of studies have already been conducted to examine factors influencing mobile payments adoption largely in the context of developed countries and there are some in developing countries context. Before undertaking any further empirical work on this topic, it was deemed appropriate to undertake review of existing studies for synthesizing the results reported, identifying their limitations and directions of further work in this important and emerging area.

Considering the discussion presented above, the aim of this study is to undertake analysis and synthesis of relevant research exist on issues related to the mobile payments adoption. In order to achieve this, the remaining part of this submission is structured as follows: next section briefly describe literature search and analysis approach followed by a brief review relevant studies is presented in Sect.  3 . Section  4 briefly outlines the main limitations of existing work followed by future research directions in Sect.  5 and finally, key conclusions are outlined in the last section.

2 Literature Search Approach

It was deemed appropriate to do keyword search in order to achieve objectives of this research. This study utilized following keywords to undertake search for relevant work using the Scopus database: “Digital Payment” OR “Cashless Payment” OR “Mobile Payment” OR “Adoption” OR “Acceptance” OR “Diffusion” OR “Usage” OR “Intention” OR “Success” OR “Satisfaction” in order to identify papers relevant to digital payment. The keyword search returned 109 articles. We were able to download 47 full articles. Then Adobe Reader’s advanced search function was employed using keywords such as “consumer” and “adoption” for all 47 full articles on mobile payment in order to narrow down articles on consumer adoption of mobile payment. The downloaded mobile payment articles were deemed to be relevant for this study if they met one of the following two criteria: (1) the data collection of research took place among consumers, or (2) the studies developed conceptual model to be empirically tested on consumers at later stage. The articles were screened out if the data was collected from merchants or focusing on organizations aspect. In the end 21 papers were found relevant for inclusion in this review. This study looked into these 21 articles which specifically focused on consumer adoption of mobile payment. Then a detailed review of these articles was conducted to identify theories utilized in this area and various drivers and inhibitors of mobile payment.

3 Systematic Literature and Findings

This section presents review summary of mobile payment adoption research. The review is classified broadly under two categories: (1) frequently used theories in research addressing consumer adoption of mobile payment; and (2) drivers and inhibitors of mobile payment adoption.

3.1 Frequently Used Theories in Consumer Mobile Payment Adoption

A large number of Information Technology (IT)/Information Systems (IS) projects and systems continue to fail leading to adverse impact of such investments on individuals, organizations and society [ 8 , 9 , 10 ]. This provides reasonable impetus to researchers for repeatedly examining factor influencing adoption and use of new technologies and systems in the contexts of individual, organization and society. Consequently, multiple theories have been employed in IS field to determine individual technology acceptance in various use contexts. Table  1 reveals frequently used theories for understanding issues related to consumer adoption of mobile payment systems. These studies were either used standalone or in combination with other dominant technology adoption theories and models.

With 14 studies Technology Acceptance Model (TAM) and its extension have been most utilized technology adoption theory/model in this domain. These studies adopted, adapted and extended TAM across various use contexts. For instance the study by Jack and Suri [ 2 ] utilized TAM alongside with Innovation Diffusion Theory (IDT) to explore adoption of mobile payments and value added services (VAS). Whereas Zhanga et al. [ 11 ] employed TAM standalone to explore factors affecting the adoption of mobile payment in particular cultural settings. The Unified Theory of Acceptance and Use of Technology (UTAUT) emerged as the second most utilized theory (originating from Venkatesh et al. [ 34 ]) with five studies employing it. Slade et al. [ 6 ] utilized UTAUT to examine consumer adoption of proximity mobile payments in the UK and Zhanga et al. [ 11 ] utilized it to examine consumer adoption of mobile payments in China. This is followed by Diffusion of Innovation Theory (DOI) utilized thrice in studies including Pham and Ho [ 12 ] who examined consumer adoption of NFC-based mobile payments. IDT was employed on two occasions by Augsburg and Hedman [ 4 ] and Zhanga et al. [ 11 ]. More than 50% of studies reviewed by Slade et al. [ 20 ] have drawn on Davis’ (1989) TAM as a theoretical base.

The remaining four theories/models were employed only once. The study of Keramati et al. [ 13 ] employed combinative model of Mallat N. factors [ 14 ] and Dahlberg and Oorni Factor model [ 35 ] to explore factors affecting ‘mobile’-payment services adoption, whereas Kapoor et al. [ 15 ] utilized Tornatzky and Klein’s theory and Moore and Benbasat’s perceived characteristics of innovating theory to determine adoption of the interbank mobile payment service and finally Gong et al. [ 16 ] utilized trust based acceptance model to study the effects of cognitive and emotional trust on mobile payment adoption.

3.2 Drivers and Inhibitors of Mobile Payment Adoption

Review also revealed that majority of the studies have reported performance expectancy (PE) construct from UTAUT and perceived usefulness (PU) from TAM as most significant determinant of consumer’s behavioral intention to use mobile payments whereas perceived risk was found as inhibitor to the adoption of mobile payments. Study of Augsburg and Hedman [ 4 ] on value added services (VAS) and adoption of mobile payments found PU can influence the consumer intention to adopt mobile payments. Consumers see payment process being easier and more efficient when VAS is integrated with the mobile payment service. Compatibility and convenience were also found as critical factors of intention to adopt mobile payments [ 4 ].

Other studies that have reported PE/PU as major predictor of consumer mobile payments were Chandrasekhar and Nandagopal [ 17 ]; Koenig-Lewis et al. [ 18 ]; Oliveira et al. [ 19 ]; Pham and Ho [ 12 ]; Slade et al. [ 20 ]; Staykova and Damsgaard [ 21 ]. Apart from PU the study of Chandrasekhar and Nandagopal [ 17 ] found consumers will adopt mobile payment use behavior if it fits into their lifestyle. Whereas Koenig-Lewis et al. [ 18 ] study revealed social influence and perceived enjoyment can reduce perceived risk of using mobile payment.

Four studies [ 13 , 22 , 23 , 24 ] have reported Perceived Ease of Use (PEOU) as major driver to consumer mobile payment adoption. These studies found in terms of consumers’ willingness to adapt to mobile payment, the impact of usability issues are more important than those pertaining to usefulness. In addition to PEOU, the study of [ 23 ] noted that implementation of mobile payment technology needs substantial considerations in terms of infrastructure availability, partnerships between various stakeholders such as banks and phone operators and quality of the business model. Whereas, Keramati et al. [ 13 ] revealed an interesting lifestyle as a driver for adoption, finding people who travel often and reside in other countries are more inclined to use M-payment services.

Apart from PEOU and PU the following studies found other significant drivers of consumer mobile payment adoption. Liébana-Cabanillas et al. [ 25 , 26 ] have reported role of external influence (that is derived from the social influence and subjective norms) as the strongest driver of consumer adoption towards mobile payment. Gao and Waechter [ 27 ] found perceived information quality, perceived system quality, and perceived service quality as major drivers of initial trust formation while examining user adoption of mobile payment services. Emotional trust was found to have stronger effect on consumers’ intention to use mobile payment [ 16 ]. Moreover, Hossain and Mahmud [ 28 ] results found cognitive style significantly related to perceived ease of use in determining mobile payment adoption. Whereas Kapoor et al. [ 15 ] found Rogers’ diffusion of innovation attributes as significant predicator for determining adoption of the interbank mobile payment service in India and Lee et al. [ 29 ] found perceived benefits as significant factor of mobile payment service acceptance.

Perceived risk (PR) was found as inhibitor by majority of the studies. Andreev et al. [ 22 ] found PR as a major inhibitor of user willingness to M-Pay for LBS. They also found magnitude of PR’s negative impact could be at least twice the magnitude of any other positive driver’s impact. Apart from Andreev et al. [ 22 ] studies such as Koenig-Lewis et al. [ 18 ], Liébana-Cabanillas et al. [ 25 ], Pham and Ho [ 12 ], Slade et al. [ 20 ] and Slade et al. [ 6 ] also found Perceived risk as the major inhibitor to consumer adoption to mobile payment. Whereas, Augsburg and Hedmann [ 4 ] found an interesting fact that insignificant effect of VAS on Perceived Ease of Use can become an inhibitor. Apart from PR, perceived uncertainty was found as major initial trust inhibitor that exerts a significant negative effect on building initial trust in user adoption of mobile payment services. Information privacy is another inhibitor to consumer adoption of mobile payment services for “fintech”. Whereas network externalities, security, and payment transaction information were found as major inhibitors to consumers ‘mobile’-payment services adoption by Keramati et al. [ 13 ].

4 Research Limitations

Augsburg and Hedman [ 4 ] research on value added service (VAS) and mobile payment have chosen three VAS but does not differentiate between them and presents them all to the experimental group. Limitation of this study is that VAS offer different value propositions and different consumers may be more attracted to some propositions than others. Gao and Waechter [ 27 ] examined the role of initial trust in user adoption of mobile payment service empirically in Australia which, in terms of national characteristics, is different from other mobile technology advancing nations such as South Korea, Japan, and Finland. Also, the results of this study may or may not be applicable to emerging markets context such as India. Individual user characteristics is also a factor which might affect but not been used in this study. The study examined initial trust formation, which may demonstrate different trust behavioral pattern with time in future [ 27 ]. Gong et al. [ 16 ] examined the effects of cognitive and emotional trust on mobile payment adoption. The limitation of this study Gong et al. [ 16 ] is that sample size was relatively small and participants were Chinese university students or faculties, which require further research in different regional/national settings with a larger sample size. Hossain and Mahmud [ 28 ] studied influence of cognitive style on mobile payment system adoption with an extended technology acceptance model. The limitation of this study is that sample size is too small and study used questionnaire which was completed by educated people with prior use experience of mobile payment. Another limitation of this study Hossain and Mahmud [ 28 ] is that it has not examined actual usage behavior.

Kapoor et al. [ 15 ] examined role of three sets of innovation attributes for determining adoption of the interbank mobile payment service. The limitation of this study is that the data collection was geographically restricted to only four largest Indian cities. Given that the culture and geographical locations do impact the diffusion of an innovations, Kapoor et al. [ 15 ] work should be tested using data from smaller cities. Kim et al. [ 24 ] studied the adoption of mobile payment services for “fintech” and the limitation of this study is that the samples of the survey were limited to Seoul, the capital area, and certain age groups were predominantly represented, giving way to regional and age biases. Liébana-Cabanillas et al. [ 25 ] examined antecedents of the adoption of the new mobile payment systems with moderating effect of age. Limitation of this study is that it was focused only on one mobile payment system (SMS), while there are other technologies such as the NFC payment systems that also need attention. Oliveira et al. [ 19 ] examined mobile payment to understand the determinants of customer adoption and intention to recommend the technology. Limitation of this study is that it hasn’t used some factors that some may consider important to the adoption of mobile payment, such as trust [ 30 , 31 ] and risk [ 32 ]. Limitation of this research also concerns the age and location of the questionnaire respondents; more than 88% were aged 45 years or less from Portugal.

5 Future Research Directions

Augsburg and Hedman [ 4 ] was conducted in Denmark, which has very high mobile usage and very high maturity in credit and debit card usage; hence the high intention to use mobile payment with or without VAS is not surprising. Further research can focus in Western countries as well as in the context of emerging markets (such as India) with high cash usage. Gao and Waechter [ 27 ] study suggest that future research should compare pre-adoption and post-adoption of m-payment trust behavior to find out whether trust behaviors changes over time. Gao and Waechter [ 27 ] also recommended examining role of additional constructs such as perceived value, perceived justice and perceived risk. Gong et al. [ 16 ] study primarily focuses on the trust transfer mechanism from one source (web payment) to mobile payment (MP) as one target. This study only examined the effects of emotional trust in web payment, perceived similarity, and cognitive trust in MP on emotional trust in MP. As emotional trust in really important in consumer decision-making, future studies could empirically examine other valid mechanisms to build consumers’ emotional trust in MP [ 16 ].

Hossain and Mahmud [ 28 ] recommended undertaking further research in the context of rural areas in Bangladesh and testing an extended model by incorporating the actual usage, cognitive style or any other relevant variables based on the recent literature on this topic. Kapoor et al. [ 15 ] study can be extended by collecting more representative data from other states and smaller towns. The future studies may want to focus more on the influences of image as an innovation attribute. Also, the future studies might want to test the various risk types associated to IMPS in order to arrive at a more convincing explanation on the influences that riskiness may have on the diffusion of IMPS in the Indian context [ 15 ].

Follow-up studies to Kim et al. [ 24 ] should analyze the impact on the acceptance of groups classified into more specific age groups, income and device through a multi-group model. Future research of Liébana-Cabanillas et al. [ 26 ] can be directed towards in various technologies such as QR codes, a two dimensional bar code, biometric fingerprints, voice payment, Google Goggles. Oliveira et al.’s [ 19 ] work can be furthered by examining age and cultural differences. Studies with a larger sample size from other geographical settings can help to confirm validity and establish generalizability of Pham and Ho [ 12 ]. Longitudinal studies should be conducted in future to test same research model at different points of time, which will allow comparisons and will help to provide further insights towards consumers’ adoption behavior towards NFC mobile payments. In addition, the future research should also validate the modified UTAUT model developed by some recent studies (e.g. Dwivedi et al. [ 37 , 38 ]; Rana et al. [ 39 , 40 ]) in the areas of technology and e-government adoption.

6 Conclusions

This study conducted a review of literature on consumer adoption of mobile payments. The salient points emerged from this literature analysis suggest that TAM and its extension as most utilized technology adoption theory/model for understanding consumer adoption of mobile payments. Performance expectancy and perceived usefulness emerged as most significant determinant of consumer’s behavioral intention to use mobile payments whereas perceived risk was found as inhibitor to the adoption of mobile payments in majority of studies.

Although this review presents a concise summary of mobile payment adoption research, insight provide by it should be interpreted in light of the following limitations. This review was based on literature search using only Scopus database, so studies that are not indexed in this database may have been excluded. Future literature reviews should consider other databases to address the limitations of this study. Also, only a subset of studies identified was reviewed, remaining studies would be reviewed in this ongoing work to explore if there are drivers and inhibitors that needs to be considered by future studies. Also, this study only presented review about theories; drivers and inhibitors, there are other aspects that require further detailed analysis. This work mainly reviewed studies on mobile payment adoption; future reviews should also include studies on other digital payment methods. The other limitation is that this study focused on consumer adoption of mobile payment excluding organization adoption and other stakeholders.

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Patil, P.P., Dwivedi, Y.K., Rana, N.P. (2017). Digital Payments Adoption: An Analysis of Literature. In: Kar, A., et al. Digital Nations – Smart Cities, Innovation, and Sustainability. I3E 2017. Lecture Notes in Computer Science(), vol 10595. Springer, Cham. https://doi.org/10.1007/978-3-319-68557-1_7

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Is there a digital divide in payments? Understanding why cash remains important for so many

Prepared by Alejandro Zamora-Pérez, Andrea Marini and Juha Honkkila

Published as part of the  ECB Economic Bulletin, Issue 2/2024 .

1 Introduction

Is the constant trend towards the digitalisation of payments creating a binary world of digital “haves” and analogue “have-nots”? By assessing payment patterns in the euro area using detailed survey data, the results presented in this article challenge two prevailing assumptions. First, we contest the idea that cash is only used by people who are less connected to the digital world, by illustrating high cash usage across people with access to digital payment tools. Second, we revisit the notion that the digitalisation of payments is a uniform process, by showing that people with more limited access to digital payment tools have diverse sociodemographic profiles. Furthermore, results show that adoption of digital payment tools is not driven solely by supply-side limitations, hinting at the significant role of personal choice and the persistence of habits. The insights gained enrich our understanding beyond a one-size-fits-all approach to everyday payments in the digital age. The findings are in line with the approach adopted by the Eurosystem to cash and payments, which aims to ensure the availability and acceptance of cash while embracing digital innovation.

2 Cash and its persistence in a digitalising world

Assessing the digitalisation of payments beyond surface-level trends reveals a more nuanced reality, with cash use remaining persistent among a broad spectrum of the population despite increasing digital adoption. Despite having a highly developed financial system and growing digitalisation, the euro area contains a significant number of people across most demographics who opt to use cash for everyday transactions. Survey data from the ECB’s Study on payment attitudes of consumers in the euro area (SPACE) provide valuable insights into the diverse ways in which different segments of the population interact with cash. [ 1 ] According to the SPACE findings, there has been a marked decline in the proportion of point-of-sale transactions conducted in cash, down from 79% in 2016 and 72% in 2019 to 59% in 2022. This figure does, however, mask the existence of mixed users, with up to 74% of people conducting at least one transaction in cash on any given day in 2022, which underscores the continued importance of cash alongside digital payment options. Contrary to other developed economies with lower cash usage, the euro area can be seen as a distinct example where the tangible benefits of cash seem to be widely perceived by the population. However, the reasons behind the persistent usage of cash in the digital age are not fully understood as they are complex and multifaceted, spanning from practical constraints to ingrained habits and preferences, which has recently prompted academic research on the matter. [ 2 ]

But are these cash usage patterns in the euro area driven by people less connected to the digital world, or are they the result of a more complex reality of individual preferences and behaviours? As digitalisation has advanced, it has often given rise to a digital divide in access to technology. [ 3 ] This phenomenon has been extensively explored in the context of internet and computer access but less so in payment methods. [ 4 ] In the digital divide literature, the “access divide” is typically referred to as the “first-level” digital divide. This is contrasted with the “second-level” divide that involves disparities in digital skills and similar aspects. [ 5 ] Access to digital payments in the euro area is primarily facilitated by having debit and credit cards or payment accounts. In this article, instead of access, we adopt a narrower measure than the traditional literature to assess a potential digital divide in payments: reported ownership of tools enabling digital payments, namely credit and debit cards and payment accounts. [ 6 ] Throughout our discussion, we use the term “digital payment tools” to specifically refer to these primary enablers of digital payments.

The group we will focus on, which for the sake of simplicity we will refer to as the “less digitalised group”, comprises individuals who report not having either a debit or credit card or a payment account. To analyse this group’s payment behaviour, we used representative SPACE data collected by the ECB in 2022, encompassing a one-day payment diary and a survey questionnaire completed by nearly 40,000 consumers across 17 euro area countries. [ 7 ] As shown in Chart 1, the main observation is that nearly a fifth of the respondents report not having at least one of these two common digital payment tools. This share, extrapolated to the whole adult population in these 17 countries, would amount to around 40 million individuals. This implies that the influence of this group on the payments landscape is far from negligible.

Lack of ownership of common digital payment tools

Nearly one in five adults (19.5%) in the euro area reports not having either debit or credit cards or payment accounts

(share of population)

Source: ECB (SPACE 2022 survey). Notes: The data encompass all euro area countries apart from Germany, Croatia and the Netherlands. The sample is representative and consists of nearly 40,000 respondents. The results vary across countries, although in most countries, the group of people reporting not having either cards or payment accounts represents between 13% and 27% of the national population.

The high share for the less digitalised group may stem partly from the nature of the reported data and may encompass not only people not having digital payment tools but also individuals unaware that they have such tools. Hence, reported figures mainly include individuals without cards or accounts, but could also point to a lack of awareness or low usage of either payment tool. For example, in the case of individuals reporting not having payment accounts, it is likely that these include a portion of the “underbanked”: people who have payment accounts but rarely use them. Another reason for the high number is the surprisingly small overlap between the two subgroups, as shown in Chart 1. [ 8 ] This overlap between people lacking both an account and a card could be explained by several factors: some may rely on other people for financial transactions (for example, their cards may be linked to a family member’s account) or use alternative forms of payment card not linked to accounts (such as prepaid cards), while others may simply have different financial strategies that do not fit conventional patterns. For example, 25.9% of non-account holders made a payment with a card during the day of the survey.

3 Beyond the binary: payment spectrum rather than payment divide?

In this section, we examine whether there really is a sharp divide in the use of payment methods or whether the situation is in fact more nuanced. In the broader literature on access to digital technology like computers and the internet, the term “digital divide” has been attacked for oversimplifying a complex reality. [ 9 ] We find that this critique applies to digital payments as well. The idea of a stark divide in ownership of digital payment tools does not fully capture the reality of everyday payments. First, we assess differences in the cash habits and sociodemographic profiles of individuals without either cards or payment accounts. The analysis suggests certain differences but, as with the broader digital divide, variations are a matter of degree. Then, we also study the possible reasons why people might be inclined not to have a common digital payment tool, focusing on aspects like physical banking presence and the persistence of cash usage.

Assessing cash habits and sociodemographic profiles

A comparison of cash-related behaviours reveals more similarities than differences between people with and without cards or accounts, albeit with the latter expected to have a greater preference for cash. Chart 2 shows how notable cash habits, preferences and attitudes towards cash attributes compare among both groups. Of those making payments during the day of the survey, 80% of people without a card or account conducted at least one cash payment, compared with 73% of the remaining population. Regarding store of value, 43% of the less digitalised group kept cash reserves at home against 38% for others. The gap widens when it comes to receiving part of their income in cash: 32% for those without cards or accounts against 15% for the rest. In terms of reported preferences, 65% of the less digitalised group consider cash important, a view echoed by 56% of others. Interestingly, individuals stating to have no clear preference between cash and cashless methods stands evenly at 22% across both groups, but the less digitalised group are nearly twice as likely to strictly prefer cash (31%) than the broader population (17%). When it comes to the perceived advantages of cash, the less digitalised group are more likely to prefer the ease and safety of cash over cards, at rates of 26% and 22% respectively, compared with 18% and 16% among the rest. Yet, they are less likely to cite cash as helping them to keep track of their spending or protecting their privacy – the most popular attributes of cash among the general population. Hence, despite the greater relative preference for cash among the less digitalised group, especially in income partly paid in cash and preferred tools, a substantial portion of the broader population also shows high cash usage patterns.

Differences in habits and preferences towards cash

(share of population in each group, percentages)

Source: ECB (SPACE 2022 survey). Notes: These graphs show the differences in the averages of cash-related variables (expressed as percentages) between the less digitalised group and the rest of the population in the 17 countries analysed. For the variable “Made at least one cash payment”, the individuals taken into consideration are those saying they made payments at a point-of-sale on the day of the survey.

But can we link the lack of cards or accounts to a specific demographic profile? The descriptive analysis summarised in Chart 3 suggests that while there is not an absolute divide in sociodemographic characteristics, notable gaps emerge in financial literacy and digital skills. For instance, 18% of individuals without digital payment tools earn a high income (defined as over €3,000 monthly) compared with 31% of the rest of the population. [ 10 ] And while education levels are relatively close, with an average of 13.4 years of education for the less digitalised group against 13.8 years of education for others, there is a lower share of individuals holding a university degree without cards or accounts. [ 11 ] While very similar percentages of both groups live in urban areas, those not having cards or accounts tend to be younger – 25% of people aged between 18 and 30 against 15% of their older counterparts – indicating that the less digitalised group are younger than the rest. [ 12 ] , [ 13 ] This might be because younger individuals – often students or people just starting their careers – are relying on family support or still gaining financial independence, impacting their ownership of digital payment tools. [ 14 ] The differences become more pronounced in financial literacy, where only 12% of less digitalised people have financial investments, as opposed to 28% of the broader population, and a similar pattern is seen with pension funds. This tendency extends to proxies for digital skills: 78% of the less digitalised group use the internet daily, less than the 87% of the general population that do so, and a larger gap exists in online banking, with 41% against 64% respectively.

Differences in sociodemographic profiles, financial literacy and digital skills

Source: ECB (SPACE 2022 survey). Notes: These graphs show the differences in the averages of demographic variables (expressed as percentages) between the less digitalised group and the rest of the population in the 17 countries analysed. Income refers to net monthly household income. An urban area is defined as an agglomeration with at least 50,000 inhabitants.

Hence, evidence shows that individuals who report not having at least one digital payment tool (whether cards or accounts) are a diverse group, proving that there is no one-size-fits-all profile. This group includes younger, mostly urban individuals who tend to use more cash on average, as well as people with lower levels of financial and digital know-how. The diversity of this group undermines the idea that digitalisation results in a homogeneous, marginalised segment, presenting a picture far from a stark digital divide. [ 15 ] So far, we have examined average differences between the two groups across various factors, but these differences do not account for how these factors interact with each other, and to what extent they influence the likelihood of lacking digital payment tools. For example, we showed that the less digitalised group tend to be younger, but this does not demonstrate whether being less digitalised is solely due to their age. A young consumer might not have a bank account not just because they are young, but also because of factors typically associated with youth, such as education level, income or employment status. For a clearer idea of how these factors combine in influencing a person’s likelihood of belonging to the less digitalised group, Chart 4 presents a simplified view of our regression analysis. Each bar in the chart represents the impact of a different factor: bars extending to the right indicate a positive association (meaning the factor increases the likelihood of a person belonging to the less digitalised group, relative to the rest of the population), while bars to the left show a negative association. This analysis confirms and reinforces previous findings. [ 16 ] It reveals that interaction with cash (blue bars), urban living, lack of employment, youth and lower incomes (yellow bars), low financial literacy (green bars) and digital skills (light blue bars) collectively influence being considered in the less digitalised group. [ 17 ] Despite the long list of factors analysed, however, other determinants could also be influential in determining ownership of digital payment tools. Two interesting factors added in Chart 4 – the persistence of cash habits and the non-influence of perceived physical banking presence – will be explored further in the next section.

Combined effect of variables on the decision to not have a card or payment account

(standardised “marginal effects” of population in each group)

Source: ECB (SPACE 2022 survey). Notes: The chart shows simplified results of the marginal effects from a probit regression, showing which factors are linked to decreased ownership of digital payment tools. The vertical zero dotted line serves as a reference point; red confidence bars that do not cross this line indicate a statistically significant effect. The estimates are relative: for instance, the negative direction for the privacy factor suggests that it is valued less by this group compared with the general population, not that they do not value privacy at all. The results for categorical and continuous variables have been standardised, making it possible to directly compare the magnitude of the impact of all variables on the likelihood of not having common digital payment tools. The estimates suggest that while the marginal effects are noticeable, they are not overwhelmingly large, which may indicate that other unaccounted factors could also be influential in determining ownership of digital payment tools. Additionally, these estimates do not confirm whether any single factor directly causes lack of ownership. This is important because of potential issues like reverse causation (it is unclear whether A causes B or B causes A) or where outside factors not considered could affect the results. The regression was calculated with a sample size of 37,262 individuals, using robust standard errors and country fixed effects.

Cash habits and lack of digital payment tools: economic necessity or personal choice?

Personal choice, together with the diversity of individual situations, may be more important than external constraints to explain cash usage and having digital payment tools in the euro area. As shown in Chart 2, the prominent use of cash in the euro area by individuals both with and without digital payment tools implies that the preference for cash extends beyond mere availability and could represent a deliberate choice in many cases. Yet, questions remain about not having digital payment tools like cards or accounts, where factors like habit stickiness, personal barriers and external constraints may play a role, as shown in Chart 4. For example, while personal constraints like financial and digital literacy or lower income certainly influence these decisions for some people, they alone do not capture the diverse reasons among different demographic groups. And unlike global trends, where distance from financial institutions and service costs are key barriers, these issues might be less influential in the euro area’s advanced financial system. [ 18 ] Indeed, our analysis below points to the limited influence of two external factors (physical banking presence and the reported changes in behavioural patterns after the pandemic), hinting that personal choice is of greater importance. [ 19 ]

Physical banking presence is not significantly different for people lacking cards or accounts compared with the rest of the population, indicating that they do not seem to face a stronger supply-side barrier. Survey data provide a good proxy for physical banking presence, capturing whether people find it easy or difficult to reach a bank branch or an ATM to withdraw cash. [ 20 ] As shown in Chart 4 above, physical banking presence has no statistical effect on the decision not to have a card or account. This suggests that in the euro area, unlike less well developed regions (Box 1), the distance from bank branches has little impact, indicating a stronger role for personal preference and personal constraints. [ 21 ] This idea is further reinforced as illustrated in Chart 5, panel a) below, where a small, statistically insignificant difference is observed between the two groups. Additionally, no average difference emerges when analysing the population coverage of branch and ATM networks in the regions where individuals reside. [ 22 ] , [ 23 ]

Physical banking presence and persistence of cash habits: two factors with little influence on belonging to the less digitalised group

Source: ECB (SPACE 2022 survey) and Eurosystem data on population coverage of bank branches and ATMs. Notes: Panel a) shows (i) the share of the population that report finding it easy to reach a bank branch or an ATM when they need to withdraw cash, and (ii) the share of the population living in a region with a bank branch or ATM located within 5 km of their home on average. By contrast, panel b) shows the share of individuals that have increased, maintained or decreased their cash usage compared with just before the pandemic.

Half of less digitalised individuals report continuing to use cash as much as before the pandemic, with almost a third even increasing their usage, indicating a significant persistence of cash habits. The pandemic was a significant disruptor of financial habits and provided a unique opportunity to observe how individuals change behaviour when conditions change. Typically, behaviour changes from within – gradually and subtly, driven by personal preferences, like starting to use new payment tools in certain circumstances for the sake of convenience. However, external (or exogenous) shocks like the pandemic often precipitate abrupt shifts in behaviour, offering a clear window to understand the stickiness of certain habits. Chart 5, panel b) shows that not only half of the less digitalised group maintained their usage of cash in physical payments, but almost a third of the group increased such usage. [ 24 ] This finding contrasts with the rest of the population, where only about 16% reported increased use of cash, indicating that the less digitalised group’s behaviour is notably distinct. The persistence of cash usage among some individuals, even in the face of external shocks, underscores the resilience of cash habits and casts doubt on preconceived notions about the inevitability of a universal digital transition.

Box 1 Unbanked beyond the euro area: do digital ownership patterns differ abroad?

Prepared by Andrea Marini, Alejandro Zamora-Pérez and Elisabeth Beckmann

How does the use of euro cash as a foreign currency differ between banked and unbanked individuals outside the euro area? So far, our main analysis has focused on factors influencing the likelihood of people being less digitalised in banking terms in the euro area. But it is important to assess if these results also hold in economies with different financial market conditions. The OeNB Euro Survey conducted by the Oesterreichische Nationalbank collects information on cash holding and saving behaviour for a group of countries in central, eastern and south-eastern Europe (CESEE). [ 25 ] , [ 26 ] This makes it possible to assess differences in patterns between the euro area and the CESEE region and facilitates the study of the determinants of the decision to hold a bank account, along similar lines to the main analysis.

The findings for the CESEE region reveal two key differences from the euro area: bank account holders are more likely to hold euro cash, and there is a notable disparity in perceptions of banking access between banked and unbanked individuals. Specifically, 30.2% of individuals with bank accounts also hold euro cash reserves, while only 10.4% of people without bank accounts do so. This suggests that banked individuals may view euro cash as a stable savings option or a safeguard against local currency fluctuations, or they may simply have easier access to it. Furthermore, banked individuals tend to have connections abroad, possibly as a result of receiving remittances, working temporarily in the euro area or travelling on holiday. There is a marked difference from the euro area regarding physical banking presence or proximity to banking services, with 47% of unbanked individuals reporting that it takes a long time to reach the nearest bank branch compared with 36% of those with bank accounts.

A statistical analysis similar to the one shown in Chart 4 confirms that the two previous findings affect the likelihood of an individual holding an account and reveals further determinants of the probability of being unbanked in these countries. Sociodemographic factors like higher income, higher education and older age are linked to holding a bank account, similar to trends observed in the euro area. Additionally, confidence in financial institutions plays an important role: a belief in the safety of bank deposits and trust in the national central bank increase the likelihood of someone holding an account.

4 Acknowledging diversity: ensuring access to cash in an increasingly digital economy

Based on the findings set out above, we see a nuanced picture of cash use and digital payment tool ownership in the euro area, casting doubt on the idea of a binary digital divide in payments. First, the prevalence of cash usage – observed in both the less digitalised group and the rest of the population – highlights the continued relevance of cash in an increasingly digital economy, although it has suffered a relative decline in use in transactions. Second, the demographic profile of those not having a digital payment tool is very diverse, indicating a broad and varied – rather than a small, homogeneous, marginalised – group. Third, the seemingly limited role of perceived physical banking presence in influencing ownership of cards or accounts points to there being a complex range of issues behind decision-making. This complexity is further illustrated by the persistence of cash habits by a significant share of the population, even after the pandemic.

These insights collectively underscore the multifaceted nature of financial and payments behaviour in the euro area. This understanding makes it necessary to acknowledge the importance of choice and personal circumstances in financial and payment decisions, as well as the crucial role of maintaining access to cash alongside digital options.

This is why, in this fast-evolving and diverse digital landscape, the Eurosystem’s role is to support and respect the diverse payment preferences across the euro area. This approach acknowledges the value of choice in financial transactions, where cash continues to play a significant role for a considerable portion of the population. The Eurosystem’s cash strategy involves regular assessments of cash services and infrastructure to identify areas where access might be diminishing. [ 27 ] This includes monitoring the distribution and availability of bank branches and ATMs and identifying remote or underserved areas. Despite this not being a factor that differentiates the less digitalised group from the rest of the population, access to cash is an important aspect that may affect payment choices and have major consequences for consumers. [ 28 ] By ensuring that cash remains easily accessible, the Eurosystem aims to provide a safety net that respects and supports those who, by choice or circumstance, opt for cash as a payment option.

These efforts are about maintaining a balanced financial ecosystem where all preferences are catered for rather than compensating for a lack of digital adaptation. While encouraging and facilitating digital innovation in payments, the Eurosystem remains equally committed to ensuring that cash continues to be a viable, efficient and secure payment option. [ 29 ] This dual approach reflects an understanding that a healthy financial ecosystem is one where digital progress and cash coexist, both serving the needs of society. This balanced perspective is crucial at a time when financial behaviours are diverse and evolving, ensuring that all preferences are respected and supported as the euro area economies navigate a complex and uneven digitalisation process.

5 Conclusion

While the term “divide” in the ownership of digital payment tools suggests a stark separation, our analysis reveals a more nuanced reality in the euro area where cash remains integral alongside digital options. Many individuals with and without digital payment tools frequently use cash, indicating that the division is not as clear-cut as is often implied. Though some people may struggle digitally, it would be a fallacy to believe that because some less digitalised groups are reliant on cash, then all cash users are necessarily less digitalised. This misconception is challenged by the diverse sociodemographic profiles within the approximately 20% of the population enjoying limited access to at least one common digital payment tool, challenging preconceived notions about their uniformity. The persistence of cash habits, even amid external shocks like the pandemic, and the seemingly little influence of perceived physical banking presence on having digital payment tools illustrate the complexity of financial behaviours. Against this backdrop, the Eurosystem is committed not only to preserving cash in recognition of these varied circumstances but also to enhancing the payment ecosystem. This includes exploring options for a digital euro. This approach aims to bolster resilience and diversity in the financial landscape, ensuring that all payment preferences are taken into consideration in the euro area.

European Central Bank, “ Study on payment attitudes of consumers in the euro area (SPACE) ”, 2022.

There is an emerging literature, extending beyond the euro area, that aims to explain the persistence of cash usage despite financial innovation. See, for example, Alvarez, F. and Argente, D., “ On the Effects of the Availability of Means of Payments: The Case of Uber ”, The Quarterly Journal of Economics , Vol. 137, No 3, 2022, pp. 1737-1789; Alvarez, F., Argente, D., Jiménez, R. and Lippi, F., “ Cash: A Blessing or a curse? ”, Journal of Monetary Economics , Vol. 125, 2022, pp. 85-128; Brown, M., Hentschel, N., Mettler, H. and Stix, H., “ The convenience of electronic payments and consumer cash demand ”, Journal of Monetary Economics , Vol. 130, 2022, pp. 86-102.

A related question is what is driving connectedness to the digital world more generally, which is mostly addressed by the literature on the digital divide. This literature, primarily focusing on information and communication technology (such as computers and the internet) is vast and started in the 1990s. Originally seen as a gap in technology access (“first-level” divide), the digital divide is now understood as a multifaceted process encompassing not only access but also motivation, skills and actual usage. See, for example, Van Dijk, J., “ Digital Divide: Impact of Access ”, The International Encyclopedia of Media Effects , 2017.

While the financial inclusion literature is an important exception in examining inequalities in the adoption of digital payment tools (particularly bank account ownership and with a focus on developing countries), it often overlooks the potential benefits of cash, as highlighted by critics. Our analysis of payment patterns in the euro area offers a unique perspective, situated between widespread cash usage in developing economies and the move towards cashless societies in some developed countries. For an overview of financial inclusion research and its shortcomings, see Demirgüç-Kunt, A., Klapper, L. and Singer, D., “ Financial Inclusion and Inclusive Growth: A Review of Recent Empirical Evidence ”, Policy Research Working Papers , No 8040, The World Bank Group, 2017, and Mader, P., “ Contesting Financial Inclusion ”, Development and Change , Vol. 49, No 2, 2018, pp. 461-483.

Recent research sheds light on differing financial and payment behaviours related to literacy and age, but less so regarding ownership of payment tools. See van der Cruijsen, C. and Reijerink, J., “ Uncovering the digital payment divide: understanding the importance of cash for groups at risk ”, Working Papers , No 781, De Nederlandsche Bank, 2023, and Doerr, S., Frost, J., Gambacorta, L. and Qiu, H., “ Population ageing and the digital divide ”, SUERF Policy Brief, No 270, 2022.

The questionnaire of the SPACE survey includes questions referring to “debit and credit cards” and “payment accounts”, without explicitly defining them for respondents. Generally, debit and credit cards exclude prepaid cards. A payment account typically refers to an account that enables the making of payment transactions, such as placing, transferring, or withdrawing funds. These two tools (cards and accounts) enable other types of digital payment means or channels, including online payments, linkages to online payment platforms (e.g. PayPal), or credit transfers.

The SPACE report covers the entire euro area, but the data for Germany and the Netherlands are taken from national payment surveys and are consequently not used in this detailed analysis. Croatia is not included as it only joined the euro area in 2023. The sizes of the samples from each country were set to achieve specific numbers of point-of-sale transactions, reflecting the country’s size. To guarantee representation of the population and every day of the week, the sampling approach incorporated quotas based on gender, age group and the day that transactions were documented in the payment diary.

This small overlap is also confirmed by World Bank microdata ( Global Findex Database 2021 ). Respondents were asked to report whether they have “an account at a bank or at another type of financial institution (...) or (…) a debit card”. According to these data, those reporting to have neither a bank account nor a debit card (a subset similar to the overlap subset of Chart 1) represent around 2% of the euro area population. As the SPACE data make it possible to assess these two groups separately (not having a debit or credit card and not having a payment account), we are able to evaluate those not having at least one of these tools.

Van Dijk, J., op. cit.

Income refers to net monthly household income.

Years of education are calculated in line with the highest education level achieved by the respondent, running from primary school to PhD and higher.

This difference may be attributed to the employment status of younger people, as they are more likely to still be students or unemployed, and hence do not have a card or bank account.

An urban area is defined as an agglomeration with at least 50,000 inhabitants.

Another possibility is that emerging patterns among this demographic are signalling a departure from the traditional reliance on both cards and accounts. For example, the need for a card may be less pronounced for people under 30 – a group characterised by higher online payment use – because having just an account can facilitate mobile payments or enable transactions through services like PayPal. Although these alternatives are not yet dominant in online payments, their use has been increasing.

While vulnerable groups are proven to be more reliant on cash and struggle digitally (see references below), our results show that it does not follow that all cash users or people lacking a digital payment tool are part of a vulnerable group. For work on the reliance of cash in groups of vulnerable people, see Broekhoff, M.-C., van der Cruijsen, C., Jonker, N., Reijerink, J., Umuhire, G. and Vinken, W., “ Digitalisation of the payment system: a solution for some, a challenge for others ”, De Nederlandsche Bank, 2023, and van der Cruijsen, C. and Reijerink, J., op. cit.

As a robustness check, we conducted parallel analyses for two separate subgroups: those without debit or credit cards and those without bank accounts. The outcomes of these additional checks align with our main findings presented in Chart 4, with the estimated coefficients having the same direction and similar magnitude across these subsets and the less digitalised group. This consistency indicates that all three subsets of the population – including the combined less digitalised group analysed in Chart 4 – exhibit similar patterns.

Although the concept of a fixed cost for setting up payment accounts suggests a potential income threshold for account ownership, our analysis – including visual inspection and statistical tests – does not confirm such threshold behaviour. This indicates that factors beyond the direct costs of account setup, possibly including various income-related variables, might influence the decision to use digital payment tools, suggesting a more nuanced relationship than initially proposed.

Globally, “lack of money”, “financial services are too expensive” and “financial services being too far” are the three most cited reasons for not having a bank account. See Demirgüç-Kunt, A., Klapper, L., Singer, D. and Ansar, S., “ The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19 ”, The World Bank Group, 2021.

Another important external factor not directly considered in the text is the degree of merchant acceptance of cash and cards. In terms of averages, there are no large differences between the two groups (cash acceptance is at 97% for the less digitalised group and 96% for the rest of the population, and for card acceptance the figures are 82% and 84% respectively). However, when these variables are included in a regression like the one shown Chart 4, higher card acceptance seems to slightly reduce the likelihood of not having at least one digital payment tool, while cash acceptance has no effect statistically.

Despite the rise of online services, banks’ physical outlets are still an important mechanism for consumers to adopt digital means of payment.

However, nuances emerge when examining the intensity of use and adaptation strategies to the monetary costs associated with cash access. The less digitalised group tends to use the cash infrastructure more frequently and exhibits a pronounced tendency to avoid transaction fees associated with cash withdrawals (as seen in the last factor of Chart 4, “Never pays ATM fees”). This behaviour implies an adaptation to avoid direct monetary costs yet it potentially incurs other, less visible, expenses, such as the cost of travelling to access cash, the time spent travelling to access cash and the effort required to adapt to varying cash access points.

The regions are defined at the NUTS 2 level, for a total of 111 regions in the 17 countries considered. A description of this coverage indicator used for these regions is the average share of the population with bank branch or an ATM within 5 km of their residence as the crow flies. The Eurosystem calculates these and more sophisticated metrics to monitor access to cash; see the article entitled “ Guaranteeing freedom of payment choice: access to cash in the euro area ”,  Economic Bulletin , Issue 5, ECB, 2022. Other more refined metrics, such as 1 and 2 km coverage, mean distance or ATM density, all show similar results.

These insights are, however, a snapshot of the current situation and cannot be interpreted causally. In the face of an external shock to supply, reduced access to cash could increase the likelihood of people adopting digital payment tools. We were able to isolate this causal effect using the instrumental variable approach and exploiting the pandemic as a natural experiment. In particular, a random subset of individuals experiencing limited cash access during the pandemic was more likely to shift perceptions of physical banking presence, which in turn nudged some towards adopting digital payments more often. This shows that, while the less digitalised group perceives as much physical banking presence as the rest of the population as shown in the main text, a supply restriction from the retail banking sector (particularly on access to cash) could force some individuals to adopt debit or credit cards and payment accounts more often.

Recent literature highlights that despite the growth of e-commerce, physical stores are set to remain relevant in the future. Physical stores are adapting to offer unique sensory experiences not replicable online and increasingly embrace omnichannel trends, where physical stores expand online and online outlets establish a physical presence. This trend, seen especially in smaller stores and areas with significant customer footfall, positions bricks-and-mortar stores as hubs for customer engagement and experiential retail. The diversity of consumer preferences, as documented in our article, might be a reason why online and offline shopping options (and hence physical payments) will retain relevance in the future. See von Briel, F., “ The future of omnichannel retail: A four-stage Delphi study ”, Technological Forecasting and Social Change , Vol. 132, 2018, pp. 217-229, and Reinartz, W., Wiegand, N. and Imschloss, M., “ The impact of digital transformation on the retailing value chain ”, International Journal of Research in Marketing , Vol. 36, No 3, 2019, pp. 350-366.

For more on motivations to hold cash in CESEE countries, see Stix, H., “ Why do people save in cash? Distrust, memories of banking crises, weak institutions and dollarization ”, Journal of Banking and Finance , Vol. 37, No 11, 2013, pp. 4087-4106. For more on motivations to hold euro cash in CESEE, see Backé, P. and Beckmann, E., “ Euro adoption in CESEE: How do financial literacy and trust in institutions affect people’s attitudes ”, OeNB Focus on European Economic Integration , Q1, 2022.

The sample covers six EU Member States (Bulgaria, the Czech Republic, Croatia, Hungary, Poland and Romania) and four non-EU countries (Albania, Bosnia and Herzegovina, North Macedonia and Serbia). The data used refer to 2021, before Croatia joined the euro area, and reported results are consistent with previous years.

See European Central Bank, “ The Eurosystem cash strategy ”.

See footnote 23.

See the article entitled “ The Eurosystem policy response to developments in retail payments ”, Economic Bulletin , Issue 1, ECB, 2024. Exploring options for introducing a digital euro is part of this broader strategy, aimed at enhancing consumer choice in a changing payments environment and complementing rather than substituting cash. See European Central Bank, “ Digital euro ”.

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• Digitalisation
• Banknotes and coins

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Digital payments and consumer experience in India: a survey based empirical study

Sudiksha shree.

1 Mumbai School of Economics and Public Policy, University of Mumbai, Mumbai, India

Bhanu Pratap

2 Department of Economic and Policy Research, Reserve Bank of India, Mumbai, India

Rajas Saroy

Propelled by recent policy initiatives and technological developments, India’s digital payment system is a promising success story in the making. At the same time, the data also points towards an increasing usage of cash. While aggregate country-level data can indicate overall preferences of citizens, we use a novel online survey-based dataset to understand how factors such as ‘perception’ and ‘trust’ in digital payments, and experience with online frauds, affect the payment behaviour of consumers. While demographic factors like age, gender and income are relevant factors which determine this choice, we find compelling evidence that a person’s usage of digital payment methods is influenced by her perception of these instruments, as well as her trust in the overall payments framework and banking system in general. We find that the degree to which past-experience with online fraud deters usage of digital payments varies with the purpose of the transaction.

Introduction

The consensus around the origin and the forms of ancient money has kept changing over the course of recorded history. But, what has not changed over the years is what money does; broadly, it facilitates trade in goods and services as medium of exchange and acts as a credible store of value. Modern day trade demands massive payments to be settled fast over long distances with minimum transaction cost. Evidently, to suit these needs the payment systems are being digitised globally. Cash, however, remains a crucial part of the trade. Therefore, the discourse on the current age payment system revolves around cash vs digital transactions.

While cash might seem convenient as it’s ingrained in our habits and is still readily accepted at more places, digital payments offer convenience by saving time and labour. There are further issues with cash use. While it provides a suitable alternative to aid the informal or parallel economy [ 3 , 21 ], digital payment offers itself as a desirable tool for institutions to fix this problem of traceability. In fact, governments around the world have taken drastic measures at huge costs to clear markets of ‘black money’. Research in the behavioural sciences conveys that people experience higher ‘pain of paying’ when paying in cash than digitally, and this contributes to deferred payments [ 17 , 19 , 20 ]. While cash may not seem to impose any direct transactional cost like digital money, it is still costly for both governments and end-users. A 2014 study found out that residents of Delhi spent around 6 million hours and ₹91 million to access cash, while the Reserve Bank of India (RBI) and commercial banks together spent about ₹210 billion towards currency related operating expenses in the same year. But on the other hand, there are also huge implicit costs to digitise the existing systems and nudge people to change [ 14 ].

In the last decade, India has rapidly digitised its payment systems and promises huge potential in the area. Digital payments recorded an increase of 46.5% in total volume in FY19 on top of an increase of 60.6% in FY18. The Unified Payments Interface (UPI), a payment system that was launched in 2016, has surpassed the milestone of a billion transactions per month. The progress in digitisation has been driven by a healthy mix of technological innovation, policy interventions, and expansion and strengthening of existing infrastructure on the supply side, coupled with an increasing proportion of the population adopting financial and digital instruments on the demand side. The government of India and the RBI have been working in synergy to push for policy and regulatory reforms. Enablers such as Jan Dhan accounts, Aadhaar and penetration of mobiles, and policies like Demonetisation and Goods and Services Tax have brought people closer to technology and banks. Recently, NEFT (National Electronic Funds Transfer) was made operational for 24 h on all days of the week, and RTGS (Real Time Gross Settlement) is expected to follow soon. The launch of UPI, along with already available digital payment modes like NEFT, IMPS, cards and Prepaid Payment Instruments (PPIs) has increased the options available to the consumer. The number of PoS (point of sale) terminals have also increased by about 40 lakhs in the last five years. PoS terminals and lightweight acceptance infrastructure such as QR codes have boosted Card/PPI based payments. Additional payment systems such as Bharat Bill Payment System (BBPS), National Electronic Toll Collection (NETC) system, RuPay cards and AePS have also boosted digital payments and the intent to incorporate modern-day technologies such as tokenisation and contactless payments will further the progress.

Despite this progress, cash use still seems to be on the uptick in India. Our paper seeks to highlight the important factors at the individual level, which influence the consumer’s decisions to use cash or digital payment. While it is critical to push for technological innovations and policy reforms, it is also imperative to understand the aspects that motivate or hinder the adoption of these technologies by the end-user. A recent survey [ 5 ], on the readiness of consumers towards adoption of newer payment technologies, ranked India second out of 27 economies on the FinTech adoption Index. Research conducted at the individual consumer level can provide an insight to understand how certain aspects are at play while making a payment decision. To this end, we use a comprehensive and multidimensional online survey which addresses many hitherto untouched dimensions of this topic, such as the difference in digital spending over various expenditure categories (groceries, e-commerce, utility bills, etc.), the choice of consumers to go purely digital or exercise a mix of cash and digital options, and the effect of psychological factors like perception and trust.

There is a dearth of studies and data covering the behavioural aspects at individual level that have an impact on choice of payment behaviour in the Indian economy. Given the massive heterogeneity of our population, different samples might produce disparate results. The High-Level Committee on Deepening Digital Payments [ 15 ] recommended that there should be periodic surveys to gauge user experience and attitude towards digital payments. The present study, is a small step towards filling the research gap in the context of such analysis.

Our key findings point towards a significant impact of perception of the payment system on how people choose to pay. Not only does a positive perception motivate people to go ‘digital’, but a relatively negative outlook on cash also has a similar impact. This finding is important in light of increasing cash use at the macroeconomic level in the country. Another significant factor is confidence in the payment system. Respondents who trust the service providers and regulators seem to have a greater likelihood of paying digitally. We find inconsistent behaviour when studying the impact of experience of digital payment fraud on choice of payment tool. The impact that experiencing such a fraud has on the choice to pay digitally differs according to the purpose of the transaction. The remainder of the study is presented in five sections pertaining to existing literature, data and methodology, sample summary statistics, empirical findings and conclusion and policy implications.

Related literature

The terms digital transaction, electronic transactions, paperless transaction or cashless transaction are almost used interchangeably in common parlance. The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money”. However, in our paper, a digital transaction is one where the payer and payee both use digital modes of payment.

Policies in many parts of the world are being designed in favour of non-cash payments because of the various problems that cash poses. Cash fuels the parallel or black economy, therefore, phasing it out might solve this problem, especially with large denomination notes [ 20 ]. The cost of printing, destroying and other cash related operational expenses in India are estimated at 1.7% of GDP [ 23 ]. Cash, however, remains a significant part of all the transactions in most countries [ 6 ].

While reading into data on the macro-level can give us a broad idea of people’s overall preferences, data at the individual level gives us an insight into how certain factors impact the choices/decisions consumers make regarding the mode of payment. Following this line of thought, several studies have analysed such issues at the level of the consumers. They reveal that the choice of payment method is impacted by a host of consumer-specific and technological factors. Transaction size has a significant impact on what mode of payment people choose. A cross- country comparison of payment diary survey data of seven countries showed that cash was the preferred mode of payment for smallest 50% and largest 25% of transactions [ 2 ]. In another study, social marginal costs were computed for various instruments for small and large transaction sizes and it was found that for larger transaction sizes, there were significant differences in cost for electronic vs non-electronic payments [ 8 ]. Studies show that demographic characteristics also play a significant role in how people choose to pay. It was found that better education and higher income lead to lower cash use compared to non-cash modes. Certain categories of age show a stronger preference for digital payments Bagnall et al. [ 2 ].

Consumer perceptions on safety/risk, convenience/ease of use, anonymity and costs have been shown to affect payment systems adoption significantly. Png and Tan [ 16 ] show that concerns about privacy emerged as one of the main psychological factors causing a bias towards cash for retail transactions. Kahn et al. [ 10 ] show that business in the unorganised economy was attributed to transactions that could be made in cash and did not reveal the agent’s identity. Bagnall et al. [ 2 ] analysed data from cross-country consumer diary surveys and found that consumers who rated cash high on ‘ease of use’ ended up using it more. In a study assessing payment perception of Dutch consumers, non-price parameters such as ‘acceptance’, ‘convenience’, ‘transaction speed’ and ‘safety’ were used to gauge the perception of payment instruments used at PoS terminals [ 9 ]. Several studies have used the Technology Acceptance Model (TAM) to show ‘perceived usefulness’ and ‘perceived ease of use’ have a significant impact on behavioural intention and thus, actual use of electronic payment systems [ 12 , 18 ].

Perceived trust in the payment system is shown to have a positive effect on the usage of digital modes of payment [ 13 ]. While the central bank and banks are traditional regulators and service providers of payments systems respectively, non-banks have also emerged as new players in the framework. A recent empirical study conducted by the Monetary Authority of Singapore [ 16 ] found that trust in banks impacts the nature of the transaction. A cross-country analysis shows that residents in countries that reported lower trust in banks preferred cash for making transactions. In some cases, while an increase in trust can lead to the opening of accounts, it might not translate to actual usage of those accounts [ 7 ]. Central banks also play a pivotal role in ensuring safety, integrity and stability of the payments system. Experience of online fraud can shape beliefs of perception and trust and can have a direct impact on payment behaviour. Media coverage of these incidents is shown to affect card payment [ 11 ]. The direction, strength and frequency of media coverage affected debit card use. Few studies show that people simply use digital modes of payment because they have exhausted their stock of cash in hand. It is called ‘cash first’ or ‘cash-burning’ and is perceived to be an optimal policy by the consumer [ 1 ]. Some studies also point that people still pay in cash simply because it is difficult to grow out of habits [ 9 ].

Survey data and empirical methodology

For the purpose of this study, primary data is collected using a structured questionnaire circulated online (Appendix 1). Following snowball sampling, the survey was shared on various social media platforms for better reach. The questionnaire was drafted in English and Hindi, to both expand and diversify the sample. It consists of 28 questions that are divided into seven sections viz. demographics, access to and usage of technology, awareness of different modes of digital payment, preference and perception on cash and digital payment systems, spending habits, experience related to fraud, and feedback on awareness campaigns.

Our study broadly aims to understand the impact of user perception, trust in payment systems, and experience of online fraud on the choice of mode of payment. For regression analysis, mode of payment is taken as the dependent variable and the independent variable is added to a baseline model according to the hypothesis being tested. Firstly, a baseline model is obtained for all five types of purchases—grocery, utilities, online shopping, durables, and gold. These transactions range from low to high value transactions. The responses recorded for different types of purchases have the following three alternatives:

• Always pay in cash,
• Always pay digitally, and
• Sometimes pay in cash and sometimes digitally.

Since the dependent variable is categorical and has more than two categories, a multinomial logistic regression is best suited for regression analysis. A multinomial logit model is an extension of logit model, with more than two categories, in no particular order. Maximum likelihood estimation is used to obtain the parameters of the model.

Let the model have j  = 1, 2 …, J categories for the dependent variable y , and X be the matrix of independent variables. In a multinomial logit model, we estimate a set of coefficients β j  = ( β 1, β 2…, β J ) corresponding to each outcome j . Setting j  = 1 as the reference or base category ( i.e ., β 1  =  0) , we have:

The parameters of the model are reported in terms of odds or log odds. Given any two possible categories for the dependent variable:

• y  = 0 for cash (reference)
• y  = 1 for digital payments
• y  = 2 for sometimes cash and sometimes digital payments

The following multinomial logistic model is estimated:

The parameter β kj is a vector of β 0j, β 1j … β kj where j ( j  = 0, 1, 2) is the category of dependent variable and there are K  +  1 ( k  = 0, 1, …, K ) independent variables. Since cash is the reference category, β k0 is set to 0. Therefore, β k1 and β k2 are respective log odds relative to the reference category.

Since, all the independent variables are categorical, they are coded as dummy variables. The reference categories for each of the independent variable in the baseline model are mentioned in the first column of Table ​ Table1 1 below.

Demographic variables

Next, we add four additional independent variables of interest to the baseline model one by one, to observe the impact of perception (of both cash and digital payment modes separately), confidence in the payment system and fraud experience on the choice to pay digitally.

The perception of cash and digital modes of payment is recorded for four parameters- cost, convenience, safety and privacy/anonymity on a three-point Likert scale with the alternatives ‘bad’ (0), ‘okay’ (1) and ‘good’ (2). The mean score for perception is computed as the simple average of parameter-wise scores for cash and digital payments. Confidence in payment systems is measured on the parameters- trust in the RBI, trust in your payment service providers (e.g. FinTechs) and trust in stability and integrity of your bank. A five-point Likert scale is to measure responses, ranging from strongly agree (0) to strongly disagree (4). The mean score is computed as a simple average of the four parameters. Online fraud experience is quantified based on familiarity with such incidents. The respondents were asked to choose from following alternatives-

• I have been a victim to digital payment frauds.
• I have received such calls/mails/texts but carefully avoided them.
• I have not received such calls/mail/texts but know someone personally who has been a victim.
• I have not received such calls/mail/texts and do not know anyone personally who has been a victim.

Sample summary statistics

A snapshot of our sample of 640 respondents is given in Chart  1 . The respondents are mostly male and educated. Most of them are either salaried employees, working in the government or private sector. This may be due to the online nature of the survey, and circulation limited to the social circles of the authors, which occurred due to the enforcement of the COVID-19 induced nationwide lockdown in India during the survey period. Responses were received from twenty states of India. The corresponding districts were divided into three tiers according to the HRA (Housing Rent Allowance) classification by the Department of Expenditure, Government of India.

Demographic characteristic of the sample

The responses are summarised in Appendix 2. Awareness as well as usage regarding various digital payment instruments were high in the sample. It is important to keep this in mind while interpreting how payment behaviour is affected by other variables. Our respondents, being from the relatively well-off sections of society, were much more aware and comfortable with cards and UPI, rather than AEPS and USSD code-based payments. Digital mode was preferred for online shopping, paying utility bills, and purchasing durables (mostly medium to high value transactions). A combination of cash and digital modes was preferred for purchases of grocery and gold, which are starkly different in terms of transaction value. Being solely dependent on cash was relatively less preferable for all purposes.

The perception of cash and digital payments are recorded on four parameters viz., ‘convenience’, ‘cost of payment’, ‘safety’, and ‘privacy/anonymity’. It is observed that on an average, digital payments perform better than cash on all four fronts. Confidence in digital payment systems is assessed on four parameters, with regards to banks (preference for depositing money in a bank, as well as trust in one’s own bank), the central bank and in other participants like payment aggregators. Respondents seemed more confident in the RBI and banks, as compared to other service providers.

Technical issues, followed by low acceptance and lack of trust were identified as the major hindrances with digital payments. The experience of online fraud is divided into four categories based on their potential intensity of impact of the fraud. Out of 630 respondents that answered the question, 532 have had some experience of online fraud. Out of 411 respondents who had experienced the incident personally, a majority (279) reported no change in the nature of payments and only 26 mentioned that either they had completely switched to cash or had reduced the use of digital mode of transaction. Respondents were also asked if they reported the incident to the concerned authority after they experienced the fraud personally. Most of the respondents did not report the incident, especially if they had not faced any losses.

Multinomial regression model: results and analysis

The baseline model (Appendix 3) provides insights on the effect of demographics on the choice of mode of payment.

Effect of demographics on mode of payment

Males are more likely to use digital modes of transaction as compared to their female counterparts for both purely digital or a combination of cash and digital instruments. With respect to age, there is pressing evidence in the case of online shopping that older individuals are less likely to pay digitally. While the coefficients are not statistically significant for other kinds of purchases, their signs support this general observation. Education is also seen to have an enabling effect on people when it comes to going digital. The tendency to avoid paying solely with cash for groceries and utilities dwindles with an increase in the level of education of the respondent. Income levels have a statistically significant, positive impact when it comes to online shopping and gold purchases through the exclusively digital payment route. Lower income groups may prefer paying using cash on delivery. Occupation and place of residence have a significant impact on choice of mode of payment for mid and high-value transactions. Homemakers, unemployed and self-employed respondents are least likely to pay digitally. For place of residence, respondents living in Tier-1 cities are more likely to pay digitally.

In general, our results point out that more affluent and privileged groups are still more likely to go digital, compared to disadvantaged groups. Hence, while efforts to expand relevant infrastructure and nudge behavioural change are welcome, an upliftment of the general standard of living of the public, education and urbanisation may also be important ways to promote digitisation of payments.

Experience of online fraud

The experience of digital payment fraud is measured on a scale of four, with ‘0’ implying ‘I have been a victim of digital payment fraud, which is the highest possible impact of fraud on a person. At the other end, ‘3’ stands for ‘neither experienced digital payments fraud nor know anyone who has been a victim’. The baseline model is augmented with these additional categorical variables, and the results are presented in Table ​ Table2. 2 . The reference category for the four fraud indicator variables is the response ‘3’, i.e., the respondent has neither been a victim of digital payment fraud, nor do they know of someone who has. Our paper highlights that frauds have differential impact based on the purpose of the transaction. For grocery payments, experiencing such frauds, first hand or otherwise, seems to demotivate people from using digital payment modes, but there is no such evidence for other types of transactions. In fact, respondents preferred using a mix of digital payments and cash for utilities and durables even if they had previously fallen prey to such frauds. It may be easier for consumers to switch to cash for grocery purchase, as compared to settling utility bills or buying durables.

Experience of Online fraud

* p  < 0.1; ** p  < 0.05; *** p  < 0.01

Perception of cash vs digital payments

Perception of cash is scored on four parameters- cost of payment through cash, convenience of payment, privacy or anonymity concerns about the payment, and safety of payment. The scores range from 0 (bad) to 2 (good). The total score is computed by taking an average of all the four parameters. The total score is a continuous variable and is added to the baseline model. The resultant coefficient is reported in log odds. As is evident from Table ​ Table3, 3 , perception of cash has a strong and significant impact on which mode of payment is chosen by the respondent. As the perception of cash improves, the likelihood of paying digitally decreases across all purchase categories. The reference alternative for payment is taken as payments made only/ always in cash, implying no (zero) relation with perception of cash. As perception improves the likelihood decreases most for grocery (low-value payment) and online payments and least for payments made for purchasing gold followed by durables, both high-value payments.

Perception of cash

DP digital payments

On the flip side, we also consider the total score for perception of digital payments, which is calculated similar to that for cash above. The coefficients (Table ​ (Table4) 4 ) are positive and statistically significant, implying that as perception improves, so does the likelihood of paying digitally. Here also, the reference alternative is using only cash. In terms of magnitude, the perception variables seem to affect grocery spends the most and gold spends the least. It can be inferred that a positive outlook on digital payment modes motivates the respondent to pay digitally. However, digital payments still have a long way to go if they are to prove themselves as good substitutes to the cheapness, convenience and privacy of cash use. Another observation from the above results is that high-value payments (gold and durables) are relatively less affected by perception of modes of payment, when compared to low- value payments (grocery).

Perception of digital payments

Trust in payment system

Besides their perception of payment modes, respondents were also asked about their trust or confidence in the payment system as a whole, which was measured on four parameters. A five-point Likert scale is used, with ‘0’ or ‘strongly agree’ implying high confidence in the payment system and ‘4’, which stands for ‘strongly disagree’ implying extreme lack of confidence in the payment system. The total score is computed by taking an average of scores obtained on all the parameters. As expected, a deterioration in consumer confidence in digital payment systems (or an increase in the ‘lack of trust’ score) worsens the likelihood of paying digitally (Table ​ (Table5 5 ).

Trust in the payment system

At the end of the survey, respondents were also asked to give their feedback on digital payments. This gives us an indication of overall sentiments and main concerns of consumers towards digital payments. In Chart  2 , a ‘ wordcloud ’ based on 50 most frequently occurring words in the feedback highlights that consumers favour the ‘convenience’ offered by digital payment methods and have an overall positive sentiment towards such technology-based inventions.

Textual analysis on feedback

While governments, regulators and service-providers are working in synergy to enhance the electronic payments systems and related infrastructure, it makes sense to study how these options are perceived by the end-user. The key policy recommendation from our study is that incorporating feedback and gauging public perception can further catalyse digitisation. We observe through our study that perception of digital payment instruments affects the payment behaviour of an individual. Digital payments were not only driven by a positive outlook on digital payments but also a negative outlook on cash. Contrary to popular belief, customers were seen to be willing to discount online fraud experience in the face of higher convenience offered by digital payment modes. The impact of experiencing fraud on the choice to pay digitally differs according to the purpose of the transaction. Also, we cannot ignore the role played by demographic factors in better digital payment adoption. Digital payments adoption is expected to increase in line with the overall socioeconomic development of the population.

While our collected data is from a geographically diverse set of respondents, it is still limited to a certain part of the population. The data has been collected during a country-wide lockdown and therefore could only include respondents who were willing to fill the survey online (English or Hindi). Thus, most of the respondents were already digitally literate, educated and economically sound when compared to the population. This is one of the major limitations of the study. Further, since responses were collected in extraordinary circumstances of nationwide lockdown, they may be biased in the sense that these were times when many were compelled to pay digitally for fear of contracting COVID-19. Also, e-commerce and technology firms (with higher acceptance of digital payments) had stepped up their services, filling in the vacuum created by closure of brick and mortar stores. Various central banks around the world conduct payment diary surveys to gauge useful variables at the individual level and observe their impact on payment behaviour. In the future, surveys like these could be taken up with a broader sample and in a more structured manner, as things gradually return to normal.

Survey on consumer experience and perception about digital modes of payments: questionnaire

See Appendix Tables ​ Tables6, 6 , ​ ,7, 7 , ​ ,8, 8 , ​ ,9, 9 , ​ ,10, 10 , ​ ,11, 11 , ​ ,12 12 .

A. Demographics

B. Access to and usage of technology (mobile phone, computer and internet )

C. Awareness on different modes of digital payments, risks related and savings/investment instruments

D. Preference and perception on cash and digital payment systems

E. Behavioural aspects/habits of spending

F. Experience related to fraud

G. Feedback on awareness campaigns

See Appendix Fig. ​ Fig.3 3 . 

Data summary

See Appendix Table ​ Table13 13 .

Regression Table for Baseline Model

The views expressed are those of the authors and do not necessarily reflect the views of the Reserve Bank of India.

Contributor Information

Sudiksha Shree, Email: moc.liamg@571idus .

Bhanu Pratap, Email: ni.gro.ibr@patarpunahb .

Rajas Saroy, Email: ni.gro.ibr@yorassajar .

Sarat Dhal, Email: ni.gro.ibr@lahdcs .

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Pandemic-driven digitization is changing the share of wallet as analog methods continue to decline. In their place, card and electronic transfers will surge, while alternatives like installment loans and cryptocurrencies will threaten giants’ market share. With competition intensifying, value-added services can help digital payment providers, processors, payment systems, and payment gateways differentiate themselves and generate new, diversified revenue streams.

What are digital payments?

A digital payment is the transfer of money or digital currency from one account to another using digital payment technologies, such as mobile wallets or mobile payment apps. Digital payments can also be referred to as electronic payments. 

Electronic payment systems

An electronic payment system digitally facilitates financial transactions between two parties. With the shift to online shopping continuing to accelerate, electronic payment methods are forcing stakeholders to reevaluate their strategies. Online electronic payments include:

• Bank transfers
• Buy now, pay later (BNPL) solutions

Mobile payment apps

Mobile digital payment apps enable users to transfer funds to an individual or company via a mobile device, including smartphones and tablets. By the end of 2023, we expect $1.152 trillion will transact via mobile P2P apps, including:  

Mobile wallets

A mobile wallet is a platform that holds card information directly on a mobile device. It can manage everything from credit cards, rewards cards, memberships, and even IDs. Consumers are increasingly turning to mobile wallets due to their convenience and ability to reduce fraud. Some of the most popular options include:

• Samsung Pay

Contactless payments

The adoption of contactless payment methods—touch-free digital payment methods that use radio-frequency identification or near field communication for making transactions—rose during the pandemic due to health restrictions and safety precautions. 

Contactless payments can be made via:

• Credit and debit cards that have near-field communication (NFC) technology
• Mobile wallets, like Apple and Samsung Pay

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Digital payment technologies

Technologies that make these digital payment services possible involve machine learning and artificial intelligence. As consumers continue making purchases with their cards, mobile wallets, or applications, machine learning technology is able to study these experiences and improve them over time. This improved experience ensures greater fraud protection and security.

Additionally, contactless digital payments rely on NFC and magnetic secure transmission (MST) technology. NFC technology enables a connection between two electronic devices over a small distance. It enables consumers to pay with their mobile wallets via tablets, smartphones, or smartwatches. Comparatively, MST technology uses a magnetic signal from the mobile device to a card reader—because it emulates a magnetic stripe like one found on a credit or debit card, MST tech is compatible with most payment processors. 

Other tech used for digital transactions includes: 

Open banking APIs

Application programming interfaces (APIs) allow legacy banks to share data and information amongst one another through a third party application. APIs are used for any company (B2B, B2B2C, BaaS ) to embed its products into a nonfinancial company’s platform. 

Open banking providers can unlock new revenue streams by charging fees based on the services clients use; they can ink data-sharing deals with partners in lieu of or in addition to those fees; and they can gain insights from working with clients that can be used to improve their own offerings.

Only 30% of financial institutions (FIs) were actually using APIs as of early 2021, according to PYMNTS, in part because incumbents face challenges running into challenges with older tech infrastructure.

Biometric verification

Biometric verification is any way a person can be uniquely identified by a device, where it evaluates one or more distinguishing biological traits such as fingerprints, retina patterns, voice recognition, and signatures.

In the financial services industry , biometric verification is used by mobile apps and other digital payment agents to authenticate a transaction. For example, smartphones can send information with a payment request including behavioral biometric information. These additional signals will make authentication more robust and fraud detection better by identifying inconsistencies in biometric information and payment behavior. 

In the financial services industry, biometric verification is used by mobile apps and other digital payment agents to authenticate a transaction. For example, smartphones can send information with a payment request including behavioral biometric information. These additional signals will make authentication more robust and fraud detection better by identifying inconsistencies in biometric information and payment behavior. 

Distributed ledger technology (blockchain)

A distributed ledger is a database that exists across several locations. Most companies use a centralized database that exists in a fixed location; but a distributed ledger removes third parties from the process.

Perhaps one of the most popular and widely used forms of distributed ledger is blockchain. Blockchain technology offers a way to securely and efficiently create a tamper-proof log of sensitive activity. Distributed ledgers like blockchain are particularly useful in the finance industry because they cut down on operational inefficiencies (saving incumbents both time and money).

Digital payment trends

Consumers are digitizing the payments they make in-store and online—bringing new tech innovations to the mainstream. This year will see a 9% growth in P2P mobile payment users, reaching 147.6 billion in the US. 

Maturing mobile P2P will enhance the opportunity—and need—for providers to monetize their product, since a bump in volume has put the industry in a better position than ever to begin capturing revenues from the services. And the growth trends of cross-border payments and real-time non-card payments are increasingly becoming a barometer for overall industry changes.  

Other trends that will continue to shape the digital payment landscape include:

• Lingering financial instability amid the pandemic will keep debit card usage strong, but growth is set to stabilize this year. 
• Competitive perks, such as lower fees and payment flexibility, will help drive credit card spending.
• BNPL solutions are reaching universal acceptance, enabling younger users less interested in existing in the credit ecosystem. 
• To entice spending, crypto providers are expanding partnerships with networks, providers, and processors. 

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U.S. Rep. Patrick McHenry , a Republican from North Carolina, said one of the first pieces of equipment his dad and a neighbor acquired to start their lawn-mowing business in the late 1970s was a used truck. It was purchased on credit with a Master Charge card, a precursor name for a Mastercard.

"That's entrepreneur’s spirit,” McHenry said. “And that's what credit cards can enable. That's like the first line of venture funding across America, the first piece of debt you can get.”

McHenry, who serves as chairman of the House Financial Services Committee, spoke Tuesday at a half-day summit in Washington, D.C., hosted by Punchbowl News and Mastercard. The event delved into the many benefits of digital payments, as well as ways to support innovation and inclusion in financial services.

The summit came at a time when some policymakers are proposing new measures that could significantly disrupt a payments ecosystem that is increasingly digital. Speakers at the event warned that the dynamic payments market — and the benefits it has provided to people like McHenry’s dad — would be harmed by proposed interchange legislation and regulations being considered in D.C.

"When you place artificial restrictions on interchange, what you're doing is hurting consumers — full stop,” said Linda Kirkpatrick, Mastercard’s president for its Americas region. “Why? Because you're removing the incentive to invest in innovation, to protect against fraud ... and to create a good consumer experience."

One of the biggest benefits of a flourishing digital payments industry is its ability to expand financial inclusion, Kirkpatrick said. That’s the concept of bringing more people into the formal financial system, thereby expanding their opportunities and boosting their prosperity.

Expanding financial inclusion enables more people to open financial accounts, start businesses, make payments and get paid, save and transfer money, and access loans.

To bring these benefits to more people, Mastercard is currently working toward its long-term goal of connecting 1 billion people and 50 million small businesses to the digital economy by 2025.

“Financial inclusion for us, it's not only the right thing to do for society,” Kirkpatrick said. “It's also good for our business.”

She added that Mastercard continually invests in cybersecurity, artificial intelligence and new payment technologies to empower and protect small businesses and people coming into the digital economy for the first time.

Her perspectives were reinforced during a panel discussion, which included small business owner Rahama Wright, Carl Holshouser, executive vice president of the trade association TechNet , and Carrie Hunt, the chief advocacy officer for America’s Credit Unions .

Wright, who runs the D.C.-based Shea Yeleen skincare company , said she couldn’t run her business without digital payments. With small businesses driving just about every local economy and employing millions of people across the U.S., supporting digital payments is an essential way to support small business, she added.

“That’s what is driving our ability to receive payments fast, quickly, as well as safely,” she said. “If we want to say that we’re supporting small businesses, help us make money faster, and that’s what digital payments allow us to do.”

Credit unions, which are nonprofits, need digital payments too, since their customers rely on them, Hunt noted. The U.S. needs innovation to stay ahead of fraudsters and to remain globally competitive, Holshouser said. Overregulation would restrict that. “Red tape never created any of the innovations that we're seeing,” he said.

McHenry said his work in Congress to support startup capital and technology firms is motivated by his father’s story. The best ways to harness that entrepreneurial spirit, he said, are by encouraging more partnerships between fintechs and banks, advancing digital payments and supporting digital asset and stablecoin legislation.

“We need to unlock that potential,” McHenry said. “And that will help banking, yes. It will help economic growth. But it also helps individuals better be able to take risks.”

He added that he’s kept the old Master Charge card his father used to help kick off his family’s business.

"Now my brother's taken it over. He employs a few hundred people,” he said. “So it's grown. It's grown quite a bit, but the first piece of outside debt or capital came from Mastercard.”

Banner photo: Rahama Wright, second from left, the entrepreneur who founded the skincare brand Shea Yeleen, with Carrie Hunt, left, the chief advocacy officer at America's Credit Unions, Carl Holshouser, executive vice president of TechNet, second from right, and Punchbowl News CEO Anna Palmer, right. 

U.S. Rep. Patrick McHenry, R-N.C., left, speaks with Punchbowl News co-founder Jake Sherman at The Summit: The Digital Payments Economy Tuesday in Washington, D.C. 

"When you place artificial restrictions on interchange, what you're doing is hurting consumers — full stop,” said Linda Kirkpatrick, left, president of Mastercard Americas, to Anna Palmer, CEO and co-founder of Punchbowl News.

J.C. Smith, who co-founded the clothing brand Bailiwick inspired by D.C.'s pride and energy, rings up a sale at the Makers Market.  

Ceramist Yolanda Spears of the Washington, D.C., pottery studio Down2Earth Pottery took part in the Makers Market that was part of the summit Tuesday. 

Rahama Wright, in green, is the founder of the skincare brand Shea Yeleen. She shared her insights at the summit and spoke with fellow D.C. entrepreneurs who took part in the Makers Market. 

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Spring Budget 2024

This is the Spring Budget 2024 in full. You can find supporting and related documents below.

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Spring Budget 2024: Policy Costings

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Spring Budget 2024: Data Sources

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Table 5.1 Spring Budget 2024 Policy Decisions

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Table 5.2 Spring Budget 2024 Measures announced at Autumn Statement 2023 or earlier that will take effect from April 2024 or later

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The Chancellor of the Exchequer presented his Spring Budget to Parliament on Wednesday 6 March 2024.

Distributional Analysis

This document sets out the estimated impact of changes to tax, welfare and public service spending policy that carry a direct, quantifiable impact on households. It also presents estimates of the overall level of tax paid and public spending received by households.

Policy costings

This document sets out the assumptions and methodologies used in the government’s costing of policy decisions announced since Autumn Statement 2023.  For each decision it contains a description of the measure, the base, and the methodology for the costing (including relevant adjustments for behavioural responses). It highlights main areas of additional uncertainty.

Data sources

This document sets out the data sources used in charts, tables and text in the Spring Budget 2024 document. This should be read in parallel to the references contained in the Spring Budget 2024 document.

Table 5.1 shows the cost or yield of all government decisions accounted for at Spring Budget 2024 which have a direct effect on Public Sector Net Borrowing (PSNB) in the years up to 2028-29. This includes tax measures, changes to aggregate Departmental Expenditure Limits (DEL) and measures affecting annually managed expenditure (AME).

Table 5.2 shows the cost or yield of all announced government policy decisions that will take effect from April 2024 or later, with a direct effect on Public Sector Net Borrowing (PSNB), costed using the determinants from the OBR’s March 2024 forecast in the years up to 2028-29. This includes tax measures, and measures affecting annually managed expenditure (AME).

Also publishing alongside Spring Budget 2024:

Spring Budget 2024: Personal Tax Factsheet

Spring Budget 2024: Non-UK domiciled individuals - Policy Summary

Changes to the taxation of non-UK domiciled individuals

Debt Management Report 2024-25

Vaping Products Duty consultation

UK ISA: Consultation

Reserved Investor Fund - Summary of Responses

Business Rates Avoidance and Evasion: Consultation response

Seizing the Opportunity: Delivering Efficiency for the Public

Private Intermittent Securities and Capital Exchange System (PISCES): Policy Paper

NatWest Retail Offer

Memorandum of Understanding for the “Trailblazer” Single Settlements for Greater Manchester and West Midlands Combined Authorities

Taxation of environmental land management and ecosystem service markets: Consultation response

Technical Note on New UK Independent Film Tax Credit

Investment Zones update

Spring Budget 2024: Overview of tax legislation and rates (OOTLAR)

Stamp Duty Land Tax: mixed-property purchases and Multiple Dwellings Relief

Stamp Duty Land Tax Relief for Multiple Dwellings Evaluation

Raising standards in the tax advice market: strengthening the regulatory framework and improving registration

Understanding the Vaping Market

Cryptoasset Reporting Framework and Common Reporting Standard

Operational reforms to the Nationally Significant Infrastructure Project (NSIP) consenting process: Government response

An Accelerated Planning System Consultation

North East Deeper Devolution Deal

Investment Opportunity Fund Prospectus

Buckinghamshire Level 2 Devolution Framework Agreement

Surrey Level 2 Devolution Framework Agreement

Warwickshire Level 2 Devolution Framework Agreement

The Case for Cambridge

Addressing Water Scarcity in Greater Cambridge: Update on Government Measures

Joint Statement on Addressing Water Scarcity in Greater Cambridge

Community-Led Housing

A Vision for Leeds

Local Nutrient Mitigation Fund Round 2

Written statement to Parliament - Revised National Networks National Policy Statement

Consultation outcome -  Draft revised National Networks National Policy Statement

National Networks National Policy Statement

Appraisal of sustainability for National Networks National Policy Statement

National Networks National Policy Statement habitats regulation assessment

Government response to Transport Committee report on draft revised National Networks National Policy Statement

Contracts for Difference Allocation Round 6 Statutory Notices

Alternative Provision Free Schools Application

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The following documents have been added: Written statement to Parliament - Revised National Networks National Policy Statement, Consultation outcome - Draft revised National Networks National Policy Statement, National Networks National Policy Statement, Appraisal of sustainability for National Networks National Policy Statement, National Networks National Policy Statement habitats regulation assessment, and Government response to Transport Committee report on draft revised National Networks National Policy Statement

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