Post-demonetization digital payment adoption: A comparative study of banked vs. unbanked populations

AbstractA major push to encourage embrace of digital payments was sparked by India's 2016 demonetization effort, which was aiming at lessen reliance on cash and promote formal financial inclusion. By contrasting adoption rates and trends between banked and unbanked populations, this study investigates the post-demonetization change in digital payment practices. We evaluate how various population segments—specifically, those both with and without formal banking access—reacted to the rise in electronic payment methods including mobile wallets, UPI (Unified Payments Interface), and debit/credit card transactions by examining data from both rural and urban areas.The study examines important adoption-influencing elements, including digital literacy, technological accessibility; trust in financial institutions, and government policy measures, using a mixed-methods methodology that includes surveys and field interviews.The findings suggest that although the banked population shifted to electronic payment methods rather quickly, the underbanked and unbanked groups encountered major obstacles, such as poor financial literacy, a lack of internet connectivity, and skepticism about online transactions. The report also shows that adoption varies by region, with metropolitan areas adopting digital payments more quickly than their rural counterparts. To guarantee the long-term viability of digital payments as a vehicle for financial inclusion, the results highlight the necessity of focused interventions to advance digital literacy, infrastructure support, and financial inclusion for the unbanked people. The study's policy recommendations for closing the digital divide and encouraging wider adoption among India's underprivileged populations are included in the conclusion.By including cost considerations, risk perceptions, and the demonetization of currency effect into the UTAUT model, the current study investigates how demonetization in India affected the use of electronic payments. The mixed-methods approach combines quantitative information from transactional and demographic data with non-quantitative information from focus groups and interviews. The accessibility of banking services, the use of technology for payments, and the financial conduct of individuals who are excluded are all taken into consideration when assessing how demonetizing the currency may affect financial inclusion. Using real facts and current research, it evaluates the event and draws conclusions on whether forced adoption encourages or hinders natural dispersal.