Digital payments as an indicator of financial inclusion in Euro Area countries

The process of digitisation in the financial sector is developing through the systematic introduction of computer systems, the establishment of Internet connectivity and the use and ownership of various information and communication devices. Information and communication technologies can increase the desired degree of financial inclusion in a country by increasing the availability of various financial services. This study examines the individual attributes that can affect financial inclusion in the Euro Area countries in 2021. Our analysis applies a probit model to data from the World Bank Global Findex database, focusing on digital payments as a proxy for financial inclusion. The main finding highlights that higher income, higher education, female gender, and younger age groups are associated with an increased propensity to engage in digital payments. Notably, our expectation of a non-linear relationship between age and digital payments is confirmed, as evidenced by the application of the Robin Hood algorithm. Specifically, we observe a positive correlation between age and digital payment usage. However, this trend reverses beyond a specific breakpoint, approximately around the age of 40, leading to a subsequent decline in digital payment activity. Furthermore, our research shows that individuals who utilised alternative payment methods alongside cash before the COVID-19 pandemic are likelier to engage in higher digital payments. Additionally, a tendency for higher adoption of digital payments coincides with countries that achieved a higher Digital Access Index (DAI), an indicator assessing the degree of digitalisation in a country. Furthermore, it is associated with countries among the Euro Area’s founding members.