Digital financial inclusion - demand side vs. supply side approach. (11th June 2021)

• Record Type: Journal Article
• Authors: Upadhyay, Ashutosh; Reddy, Kalluru Siva
• Is Part Of: International journal of electronic finance. Volume 10:Number 3(2021)
• Page Start: 191
• Page End: 210
• Publication Date: 2021-06-11
• Subjects: payment systems -- digital financial inclusion -- DFI -- demand side -- supply side -- central bank policies -- income -- incentives; Financial services industry -- Computer networks -- Periodicals; Electronic commerce -- Periodicals; 332.178
• Languages: English
• ISSNs: 1746-0069

Abstract

This paper explores the measurement of digital financial inclusion (DFI) in India by analysing the parameters such as per capita bank accounts, cards, retail payment systems, internet and broadband connections from both the supply side and demand side data. We observe substantial gaps in the level of DFI brought out by these two datasets, with the supply side seeming to overestimate the level of digital financial inclusion. We also propose a theoretical model for equilibrium in demand and supply sides of DFI. Supply of DFI is divided into two components of 'autonomous' and 'induced' supply. We find that demand for and (induced) supply of DFI is directly proportional to the income level of users and the incentives provided for the usage of DFI products/services. For a sustainable model of DFI, both the demand and supply sides should balance and complement each other, and supply-side infrastructure should be available and scalable, to meet a higher level of demand for DFI.