Digital Finance Revolution: Evaluating its Effects on Inclusive Financial System

Abstract

Over the past few years, there has been notable progress in India’s efforts to enhance financial inclusion. The impact of adopting Digital Financial Services (DFS) has been on the rise, reflecting the Government of India’s ongoing commitment to extending financial services to those who are traditionally underserved in the banking sector. To expand financial inclusion and create a secure operational atmosphere for digital financial businesses, India should aim to reach out to the underserved sections of its population. With this regard, this research explores the profound impact of adopting DFS on Financial Inclusion (FI), a topic of increasing significance in today’s global economy. The research employs a comprehensive approach, encompassing both quantitative and qualitative analyses, drawing upon primary and secondary data sources. A key dimension under scrutiny includes access to technology, trust and security, transaction cost, product offerings and digital literacy of digital financial service adoption. By surveying through a questionnaire, primary data is collected from 510 respondents. The study used a cross-sectional research design. The data underwent cleaning and analysis using the statistical technique of structural equation modelling to investigate the association among the constructs and variables. The finding of the study indicates that adopting DFS has a significant impact on financial inclusion and it mitigates the traditional barriers to financial inclusion such as physical distance, documentation requirements and transaction costs. The study contributes to the evolving discourse on financial inclusion by shedding light on the multifaceted impact of adopting digital financial services.