Financial Literacy and Its Effect on Banking Service Adoption

Abstract

This paper tests the impact of financial literacy on the uptake of banking services using a mixed-methods design which combines both quantitative models and qualitative information. The results of one thousand, two hundred respondents of a survey conducted with the help of regression analysis showed that there is a strong positive relationship between financial literacy level and the adoption of a banking service especially in the area of mobile-banking, digital payment as well as savings products. Logistic regression proved that the higher is the level of literacy, the closer the probability to adopt formal financial services, and thematic analysis of interviews confirmed that literacy creates the sense of security, eliminates the risks, and stimulates proactive activity among the financial institutions. The findings also showed significant demographic gaps: population living in urban areas, younger-aged and tertiary-educated people have been found more literate and adoption than rural populace, the older population, and the less enlightened. The differences due to gender were still observed but not so significant as women demonstrate slightly lower literacy and better commitment to mobile savings tools. Regional differentiation highlighted the importance of infrastructural access on shaping adoption effects, whereas savings behaviour analysis showed that the individuals with higher financial literacy were more consistent in financial planning coefficients and stable against economic turmoil. Taken together, the results reaffirm the importance of financial literacy as a key characteristic of financial inclusion (which interacts with income, education, and infrastructure to affect adoption patterns). The paper has come to the conclusion that financial literacy can be increased with the help of specific education, public enlightenment as well as all-inclusive digital solutions to close the existing gaps in the adoption of banking activities, decrease exclusion and make an objective contribution to more uniform socioeconomic growth.