Perception vs. reality: Analysing the nexus between financial literacy and fintech adoption

Fintech has revolutionized the financial services sector, fundamentally transforming how individuals and businesses manage their finances. However, effective and responsible utilization of these innovative services may require a certain degree of financial competence. To explore this possibility, this study investigates the nexus between financial literacy and fintech usage in the Indian context, considering two distinct measures of financial literacy. Primary data were collected conveniently from 391 respondents through a cross-sectional survey. Probit regression was applied to analyze the relationship between the two dimensions of financial literacy and the adoption of fintech services across three segments: mobile banking, mobile payments, and digital lending. The findings reveal a positive relationship between individuals’ subjectively perceived financial literacy and their propensity to use all three fintech services. Conversely, objectively measured financial literacy demonstrates a positive association only with the likelihood of using mobile banking. The study also identifies demographic characteristics as contributing factors to variations in fintech adoption. The study’s findings hold value for policymakers and fintech service providers, as they underscore the importance of enhancing individuals’ subjective perceptions of their financial abilities to promote wider adoption of fintech services.