Title: Digital financial inclusion - demand side vs. supply side approach

Authors: Ashutosh Upadhyay; Kalluru Siva Reddy

Addresses: Reserve Bank of India, College of Agricultural Banking, University Road, Pune, 411016, India ' Gokhale Institute of Politics and Economics, Pune, 411004, India

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.

Keywords: payment systems; digital financial inclusion; DFI; demand side; supply side; central bank policies; income; incentives.

DOI: 10.1504/IJEF.2021.115664

International Journal of Electronic Finance, 2021 Vol.10 No.3, pp.191 - 210

Received: 25 Aug 2020
Accepted: 10 Feb 2021

Published online: 11 Jun 2021 *

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