Evaluating Customer Preparedness for a Cashless Economy: Evidence from an Empirical Study

Abstract

The move to a cashless economy has become one of the new characteristics of the financial ecosystems of the modern world, the way consumers shop and communicate with the digital world. The study aims to quantify the willingness of the customers to adopt a cashless payment system and to determine the most important factors influencing the adoption behavior of the banking customers in Kerala. Rooted in the Technology Acceptance Model (TAM), the major constructs under research include digital financial literacy, perceived usefulness, perceived ease of use, trust, security, infrastructure, and barriers influencing customer preparedness. The data were collected using a questionnaire from 500 respondents, and the data were processed with the help of exploratory factor analysis (EFA), a test of reliability, correlation, and regression. The findings reveal that the following characteristics play a momentous role in increasing consumer readiness: digital financial literacy, perceived usefulness, trust, technological infrastructure, and perceived barriers and security concerns have a negative effect. The overall scale of measurement had reasonable internal consistency (Cronbach’s alpha = 0.797 for 32 items). The exploratory factor analysis showed that it has a clear multidimensional structure with distinct components of digital financial literacy, perceived ease of use, barriers, infrastructure, security, and trust, which underlie the conceptual division of the major constructs of cashless adoption. Especially, there were no significant differences in digital financial literacy scores by gender (t (489) = 1.144, p = 0.253) or correlation with age (r = -0.011, p = 0.800), which shows that age and gender do not have significant effects on readiness for a cashless economy in the sample that was studied. The model accounts for a significant part of the variation in readiness, and it is valid that consumer preparedness for a cashless economy is multidimensional in nature. The research provides meaningful insights for making policies and bridging the gap in implementing a Cashless Economy.