An Analysis of Digital Financial Literacy among College Students
Dr. Amit A Rajdev,
Assistant Professor – Finance,
Department of Management,
Atmiya University, Kalawad Road,
Rajkot – 360 005.
Email:aarajdev@aits.edu.in
Mb. No: 73839 92812
Address: “Jal Tarang”, Gayakwadi Street No: 10,
Near Sadhu Vaswani School,
Rajkot (Gujarat) – 360 001.
Ms. Tejal Modhvadiya,
Student – MBA Programme,
Department of Management,
Atmiya University, Kalawad Road,
Rajkot – 360005.
Email:tejalmodhvadiya000@gmail.com
Mb. No:90811 62848
Address: “Ram Nivas”, 64 Krishna Park,
Near Avsar Apartment, Zaveri Baug,
Porbandar (Gujarat) – 360 575.
Ms. Payal Sudra,
Student – MBA Programme,
Department of Management,
Atmiya University, Kalawad Road,
Rajkot – 360005.
Email:payalsudra3877@gmail.com
Mb. No:72278 16291
Address: 112, Aastha Village,
Opp. Jyoti CNC, Kalawad Road,
Metoda,
Rajkot (Gujarat) – 360 0021
An Analysis of Digital Financial Literacy Among College Students
Abstract
The present research work analyzed the level of digital financial literacy of graduate and post graduate students of Saurashtra region. The objective of research was to study the relationship between demographic variables and level of digital financial literacy. It was also aimed at exploring the relationship between digital financial literacy and use of digital financial services. Digital Financial Literacy was measured using three dimensions: knowledge of digital financial products and services, awareness of digital financial risk and its control and knowledge of consumer rights and redress procedures. For measurement of digital financial literacy, 135 students were selected using convenient sampling method and data were collected using structured questionnaire. The data were analyzed using SPSS. We found that on an average 47 per cent of students answered digital financial literacy questions correctly with median score of 57. The demographic variables like age and education significantly affect the level of digital financial literacy. However, Male and female students do not have significant differences with respect to the level of digital financial literacy score. We found that there is a gap between level of digital financial literacy and usage of digital financial services.
Key Words: Digital Financial Literacy, Digital Financial Services, E-Wallets, Unified Payment Instruments (UPI).
Introduction
Technology has transformed the entire mechanism of financial system. The blending of technology and finance has given birth to fintech industry. The new industry is purely digital in terms of financial services, products, institutions and markets. It comprises of digital financing, digital investments, digital money, digital payments, digital insurances and digital financial advice (Gomber, P., Koch, J. A., & Siering, M., 2017).
Going for digital economy provides several benefits to government, users (consumers) and service providers. For government, it gives benefit of financial inclusion whereby marginalised people can be included in financial system and it also helps in reducing poverty (Ozili, P. K. 2018). According to a report from Institute, M. G. (2016) digital economy may also increase GDP growth by extra 6 percent compared to traditional models for emerging economies. For users, being digital means saving of time and resources in utilising digital financial services like credit or debit cards, e-wallets, UPI and net banking. For Service Providers, it becomes easy to provide financial services virtually and at lowest transaction costs. It is the reason why emerging economies have targeted digital financial eco-system as a new engine for economic growth.
Effective use of digital finance requires that user must have knowledge of digital financial products and services. Morgan, P. J., Huang, B., & Trinh, L. Q. (2019), based on dearth of research work on digital financial literacy, have suggested G20 countries to have a standardized definition of digital financial literacy and design tools to assess it.
The present research work measures digital financial literacy of graduate and post-graduate students of Saurashtra Region (Gujarat) based on the framework provided by Morgan, P. J., Huang, B., & Trinh, L. Q. (2019).
Research Objectives
The research objectives are:
Literature Review
The Report of the Committee on Deepening of Digital Payments (2019), submitted to RBI, defines digital transactions as the transactions in which both the originator and beneficiary use digital mode to send or receive money. It requires that at least one of the two lags should be without cash. The digital payment transactions in India include National Electronic Funds Transfer (NEFT), National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Unified Payment Instruments (UPI), Electronic Clearing Service (ECS), Credit and Debit Card Payments, Pre-Paid Payment Instruments (PPIs) like e-wallets.
According to Morgan, P. J., Huang, B., & Trinh, L. Q. (2019) Digital Financial Literacy (DFL) is composed of four components that include knowledge of digital financial products and services, awareness of digital financial risk, knowledge of digital financial risk control and knowledge of consumers rights and redress procedures.
Morgan, P. J., Huang, B., & Trinh, L. Q. (2019) have suggested following four dimensions for measurement of Digital Financial Literacy (DFL):
Research Methodology
Figure 1 indicates components of Digital Financial Literacy and its relationship with usage of Digital Financial Services. Demographic variables like gender, age and education are expected to affect the level of Digital Financial Literacy.
A Questionnaire was designed to measure the level of digital financial literacy of students. It was divided into four parts. The first part measured the frequency of usage of Digital Financial Services. The second part focused on first dimension of DFL i.e. Knowledge of Digital Financial Products and Services (KDFPS).
Figure 1 Digital Financial Literacy (DFL)
Questions like “What is the use of internet banking?”; “Which card demands interest charges if balance is not paid off in 30 days?” were asked to measure Knowledge of Digital Financial Products and Services (KDFPS). Total 23 Items were included in this category.
Table – 1.1
|
|
|
Frequency |
Percent |
|
Gender |
Male |
52 |
38.5 |
|
|
Female |
83 |
61.5 |
|
Age |
Less than 18 Years |
25 |
18.5 |
|
|
19 to 22 Years |
88 |
65.2 |
|
|
More than 23 Years |
22 |
16.3 |
|
Education |
Graduation |
48 |
35.6 |
|
|
Post-Graduation |
87 |
64.4 |
Respondents’ Profile
In third part, we measured Awareness of Digital Financial Risk & its Control (ADFRC) and Knowledge of Consumer Rights & Redress Procedures (KCRRP). To measure Awareness of Digital Financial Risk & its Control (ADFRC); we asked questions like “Are you aware about cyber security risk in case of digital financial apps?; “Do you share your password with others?” . Total 12 items were included to measure ADFRC. Knowledge of Consumer Rights and Redress Procedures (KCRRP) was measured using 3 items. The last part of questionnaire was of demographic variables related to students. Finally we calculated total score of 38 items and measured Digital Financial Literacy (DFL).
We selected 150 students of Saurashtra using convenience sampling method and found 135 responses valid. Table 1.1 shows profile of respondents of this study.
Analysis
Digital Financial Literacy (DFL) was measured using 38 items which was composed of following three dimensions:
The overall DFL score was calculated based on percentage of correct answers given by the respondents.
Table – 1.2
Descriptive Statistics: Overall Digital Financial Literacy Score
|
Central Tendency |
Value |
|
Mean |
46.7 |
|
Median |
57.0 |
|
Mode |
57.0 |
|
SD |
5.13 |
|
Minimum |
0.70 |
|
Maximum |
100.0 |
Table 1.2 indicate descriptive statistics of digital financial literacy score. Accordingly, on an average young students answered 46.7 percentage of the questions correctly. The median percentage of correct scores was 57 percent. The students based on overall median score of DFL were subdivided into two groups; the first group of students who scored more than median score was categorized as students having high DFL and the second group of students who scored lower than median score was under low DFL category.
Knowledge of Digital Financial Products and Services (KDPFS)
Table 1.3 indicates the performance of students towards 23 questions of Knowledge of Digital Financial Products and Services (KDPFS).
Table 1.3
Percentage of Correct Answers given by respondents for
Knowledge of Digital Financial Services (KDFS)
|
Rank |
Question |
Question Subject |
Percent of Correct Answer |
|
1 |
1 |
E-Banking |
90.4 |
|
2 |
6 |
Abbreviation of EFT |
86.7 |
|
3 |
5 |
Use of Net banking |
77.8 |
|
4 |
13 |
Charges on Credit Card |
76.3 |
|
5 |
17 |
Use of Paytm |
70.4 |
|
6 |
7 |
Concept of Debit Card |
68.9 |
|
7 |
3 |
Performing Net banking Transactions |
66.7 |
|
8 |
19 |
Use of E-wallet |
63.7 |
|
9 |
18 |
Cashback |
59.3 |
|
10 |
22 |
UPI PIN |
57.8 |
|
11 |
21 |
Features of UPI |
55.6 |
|
12 |
15 |
Features of E-wallet |
51.9 |
|
13 |
12 |
Feature of Credit Card |
51.1 |
|
14 |
14 |
Concept of E-wallet |
51.1 |
|
15 |
9 |
Knowledge of Credit Card |
44.4 |
|
16 |
10 |
Functionality of Debit Card |
42.2 |
|
17 |
11 |
Prerequisites of Using ATM First time |
42.2 |
|
18 |
2 |
Use of IFSC |
40.7 |
|
19 |
20 |
Abbreviation of UPI |
40.0 |
|
20 |
8 |
Abbreviation of POS |
39.3 |
|
21 |
23 |
Methods to Transfer Money using UPI |
34.1 |
|
22 |
16 |
Type of Wallets |
26.7 |
|
23 |
4 |
Information required for first time use of Net banking |
24.4 |
The performance of students for KDPFS indicates percentage of students who answered each question correctly, organized in descending order. Students scored more than median percentage in 10 topics (out of 23) which include e-banking (90.4%), Electronic Fund Transfer (86.7%), use of net banking (77.8%) and charges on credit card (76.5%), Use of Paytm (70.4%), Concept of Debit Card (68.9%), Performing Net Banking Transaction (66.7%), Use of e-wallet (63.7%), Cashback (59.3%) and UPI PIN (57.8%). On the other hand, the students scored less than median percentage in 13 topics (out of 23) which include features of UPI, features of e-wallet, features of credit card, concept of e-wallet, knowledge of credit card, functionality of debit card, prerequisite for using ATM first time, Use of IFSC, Abbreviation of UPI, Abbreviation of POS, Methods to Transfer money using UPI, Type of wallets and Information required for first time use of Net banking.
Awareness of Digital Financial Risk & Its Control (ADFRC)
Table 1.4 indicates performance of students towards 12 questions of Awareness of Awareness of Digital Financial Risk & its Control (ADFRC).
Table – 1.4
Percentage of Correct Answers given by respondents for
Awareness of Digital Financial Risk & Its Control (ADFRC)
|
Rank |
Question |
Question Subject |
Percent of Correct Answer |
|
1 |
5 |
Verification of Beneficiary’s Mobile Number |
85.9 |
|
2 |
6 |
Verification of Payment Collect Request |
79.3 |
|
3 |
14 |
Awareness about cyber security risk |
76.3 |
|
4 |
2 |
Updating Payment Transaction Application |
72.6 |
|
5 |
7 |
Performing Financial Transaction using Open Network |
69.6 |
|
6 |
3 |
Use of antivirus software for protection |
68.9 |
|
7 |
15 |
Sharing Password with others |
68.1 |
|
8 |
1 |
Summary of Financial Transactions |
66.7 |
|
9 |
12 |
Change in Password Frequently |
65.2 |
|
10 |
4 |
Common Password for All Apps |
64.4 |
|
11 |
8 |
Mechanism to Prevent Leakage of Data |
59.3 |
|
12 |
9 |
Adequacy of Risk Management by third party |
54.1 |
The performance of students for ADFRC indicates percentage of students who answered each question correctly, organized in descending order. 86 percent of students said that they verify beneficiary’s mobile number before performing financial transaction. It was found that students scored more than median percentage in 11 items (out of 12) except one i.e. adequacy of risk management by third party.
Knowledge of Consumer Rights & Redress Procedures (KCRRP)
The third dimension of DFL is knowledge of consumer rights and redress procedures. Table 1.5 indicates performance of students towards 3 questions of Knowledge of Consumer Rights & Redress Procedures (KCRRP).
Table – 1.5
Percentage of Correct Answers given by respondents for
Knowledge of Consumer Rights and Redress Procedures (KCRRP)
|
Rank |
Question |
Question Subject |
Percent of Correct Answer |
|
1 |
13 |
Complaint Mechanism |
62.2 |
|
2 |
10 |
Registration of DFS Providers with Regulatory Body |
59.3 |
|
3 |
11 |
Following KYC Guidelines |
54.1 |
The performance of students for KCRRP indicates percentage of students who answered each
question correctly, organized in descending order. It was found that only 54 percent of students verify that financial services providers follow KYC guidelines. This score was lower than median score of 57 per cent. In case of complaint mechanism, 62 per cent of students suggested that they verify complain mechanism of DFS providers. Similarly, 59 per cent of students check registration of DFS providers with regulatory body before going for financial transactions. The scores of these two items were higher than the median score.
Demographic Variables and Digital Financial Literacy
Table 1.6 presents the mean scores of DFL, KDFS, ADFRC and KCRRP based on demographic variables (gender, education and age). To analyse the differences in literacy score based on gender and education, independent samples t-test was used. The relationship between age and literacy score was analysed using one way ANOVA test.
From the test results for gender and digital financial literacy, it was found that there is no significant difference in average financial literacy score of male and female students with respect to DFL (t= – 0.139, P>0.05), KDFS (t=0.313, P>0.05), ADFRC (t= – 0.821, P>0.05) and KCRRP (t= – 0.213, P>0.05).
The test results of education showed significant differences in average scores of DFL (t=2.742, P<0.05), KDFS (t=2.848, P<0.05) and ADFRC (t=1.86, P<0.10) for graduate and post graduate students except KCRRP (t=– 0.130, P>0.05). Post-graduate students are found to have high digital financial literacy compared to graduates.
Table – 1.6
Demographic Variables & Digital Financial Literacy
|
|
DFL |
KDFS |
ADFRC |
KCRRP |
|
Gender |
|
|
|
|
|
Male |
22.59 |
12.75 |
8.11 |
1.73 |
|
Female |
22.72 |
12.53 |
8.42 |
1.77 |
|
t-statistic |
- 0.139 |
0.313 |
- 0.821 |
- 0.213 |
|
Sig. |
0.889 |
0.755 |
0.413 |
0.832 |
|
Education |
|
|
|
|
|
Undergraduate |
21.08 |
11.46 |
7.85 |
1.77 |
|
Postgraduate |
23.55 |
13.25 |
8.55 |
1.75 |
|
t-statistic |
2.742 |
2.848 |
1.86 |
-0.130 |
|
Sig. |
0.007 |
0.005 |
0.065 |
0.897 |
|
Age |
|
|
|
|
|
Less than 18 Years |
20.56 |
11.32 |
7.52 |
1.72 |
|
19 to 22 Years |
22.62 |
12.53 |
8.38 |
1.70 |
|
23 Years and more |
25.27 |
14.41 |
8.36 |
2.00 |
|
F Ratio |
5.272 |
3.768 |
2.638 |
0.768 |
|
Sig. |
0.006 |
0.026 |
0.075 |
0.466 |
The test results of one way ANOVA indicate significant influence of age on all dimensions of digital financial literacy i.e. DFL (F=5.272, P<0.05), KDFS (F=3.768, P<0.05) and ADFRC (F=2.638, P<0.10) except KCRRP (F=0.768, P>0.05). The students in the age group of 23 and more than 23 years have scored high in digital financial literacy compared to the students who are in age group of 19 years to 22 years and less than 18 years.
Digital Financial Literacy and Use of Digital Financial Services
Table 1.7 presents the relationship between digital financial literacy and actual usage. It is hypothesised that digital financial literacy is significantly associated with actual usage of digital financial services. Chi-Square test of independence was used to test this hypothesis. Since Chi-square test requires categorical variable; the students were categorized into two groups. First group of students who scored more than median was termed as high DFL group and second group of students who scored less than median was termed as low DFL group.
Table – 1.7
Digital Financial Literacy and Use of Digital Financial Services
|
|
DFL Category |
Total |
Chi-Square |
Sig. |
|
|
Use of Internet Banking |
Low DFL |
High DFL |
|
|
|
|
Nil |
36 |
20 |
56 |
2.078 |
0.354 |
|
1 to 3 Times |
23 |
22 |
45 |
|
|
|
More than 3 Times |
18 |
16 |
34 |
|
|
|
Total |
77 |
58 |
135 |
|
|
|
Use of Credit Card |
|
|
|
|
|
|
Nil |
30 |
21 |
51 |
2.551 |
0.279 |
|
1 to 3 Times |
32 |
19 |
51 |
|
|
|
More than 3 Times |
15 |
18 |
33 |
|
|
|
|
77 |
58 |
135 |
|
|
|
Use of E-Wallets |
|
|
|
|
|
|
Nil |
44 |
32 |
76 |
0.972 |
0.615 |
|
1 to 3 Times |
23 |
15 |
38 |
|
|
|
More than 3 Times |
10 |
11 |
21 |
|
|
|
|
77 |
58 |
135 |
|
|
|
Use of Debi Card |
|
|
|
|
|
|
Nil |
29 |
14 |
43 |
8.115 |
0.017 |
|
1 to 3 Times |
30 |
17 |
47 |
|
|
|
More than 3 Times |
18 |
27 |
45 |
|
|
|
|
77 |
58 |
135 |
|
|
|
Use of UPI |
|
|
|
|
|
|
Nil |
54 |
36 |
90 |
1.149 |
0.563 |
|
1 to 3 Times |
16 |
14 |
30 |
|
|
|
More than 3 Times |
7 |
8 |
15 |
|
|
|
|
77 |
58 |
135 |
|
|
The actual usage was measured by asking students the frequency of monthly usage of DFS services like internet banking, use of credit card, use of debit card, use of e-wallets and use of UPI. The frequency of monthly usage of DFS was measured using three categories no use, 1 to 3 times and more than 3 times. The results indicate no significance relationship between actual usage of DFS and level of DFL except debit card (Chi-Square=8.115, P<0.05).
The results are consistent with APAC (2018) that suggests consistent gap between consumer awareness and consumer usage regarding digital financial services in countries like India.
Conclusion
The research work aimed at analysing the level of digital financial literacy of graduate and post graduate students of Saurashtra region. We found that on an average 47 per cent of students answered digital financial literacy questions correctly with median score of 57.
The second objective was to analyse the relationship between demographic variables and level of digital financial services. We found that male and female students do not have significant differences with respect to digital financial literacy. However, post-graduate students scored high in digital financial literacy compared to graduate students. Similarly, we found significant differences in level of digital financial literacy based on age.
The last objective of research was to analyse the relationship between level of digital financial literacy and use of digital financial services. It was found that here is consistent gap in level of digital financial literacy and use of digital financial services. In spite of high digital financial literacy, students have lower usage of digital financial services. These results are consistent with literature.
The results of research have three implications for stakeholders of fintech industry. First, there is a need of digital financial literacy programs that benefit college going students. Second, students of post-graduate programme have high digital financial literacy so they can be targeted for usage of digital financial services. Third, there is a need to focus on awareness of digital financial risk and its control and knowledge of consumers rights and redress procedures as these components are important constituents of digital financial literacy.
References
APAC (2018). Digital Payments: Thinking beyond Transactions (APAC-Jun 2018). APAC Research Report. APAC, PayPal Inc. retrieved from https://www.paypalobjects.com/digitalassets/c/website/marketing/global/shared/global/media-resources/documents/PayPal_Asia_Research_Report_Digital_Payments.pdf
Assessment of the Progress of Digitization from Cash to Electronic – RBI Report (2019) retrieved from https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/CASHB74203395BD64E2ABC1BD5F68D8AEF13.PDF
Gomber, P., Koch, J. A., & Siering, M. (2017). Digital Finance and FinTech: Current Research and Future Research Directions. Journal of Business Economics, 87(5), 537-580.
Institute, M. G. (2016). Digital Finance for All: Powering Inclusive Growth in Emerging Economies.
Morgan, P. J., Huang, B., & Trinh, L. Q. (2019). The need to promote digital financial literacy for the digital age. IN THE DIGITAL AGE.
Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340.
The Report of the Committee on Deepening of Digital Payments (2019), retrieved from https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CDDP03062019634B0EEF3F7144C3B65360B280E420AC.PDF
