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Dr. Pranab Mukherjee in 2010 said “Financial literacy is a prerequisite for effective financial inclusion,” which will ensure that financial services “reach the unreached and under-reached sections of the society,” Financial literacy is the application of skills and knowledge that lets a person to make informed and well-equipped decisions in relation to his finances. According to OECD INFE ‘Financial literacy is a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing’. It can be stated as having basic and applied knowledge of expenditure, investing, budgeting and saving. Financial literacy also encompasses understanding financial concepts like risk, return, diversification, net worth, interest etc. It also includes skills and understanding of financial planning according to income, sources, retirement, needs and inflationary trends. World Bank says the term financial literacy is associated with financial knowledge, while financial capability is a broader term encompassing behaviour and the interaction of knowledge, skills, and attitudes. Financial inclusion is the access to affordable and useful financial products and services which meets their requirements in a sustainable way. The path to financial inclusion can be achieved only when financial literacy is improved not only on paper but also on ground level. According to RBI, Financial literacy can broadly be defined as “Providing familiarity with and understanding of financial market products, especially rewards and risks, in order making informed choices”. Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals.
In order to achieve financial inclusion, we have to work on increasing financial literacy and financial temperament and to further enrich financial literacy the stakeholders have to work upon increasing digital tools, technologies, training and tailor-made financial services. According to CGAP digital ðnance has the ability to offer cheap, suitable and safe banking and financial services to poorest of poor in developing countries which would help in poverty reduction (World Bank). Digital financial inclusion has a lot of benefits like it reduces manual paperwork, documentation, circulation of physical cash, high inflation levels at the primary level. At the secondary level it can help in the welfare of individuals and businesses by providing a suitable digital platform which can help in carrying out financial transactions with much ease and reliability. While at the tertiary level if it can be applied with proper legal measures, technical guidance and mass reach it can eliminate corruption, fraud, illegal transactions and greater financial inclusion. Therefore, it can be said that digital financial literacy if implemented with proper political, legal and social settings, infrastructural development it can help in cost reduction, greater efficiency, less corruption and more financial inclusion. Post Demonetization the use of digital financial literacy and subsequent digital financial inclusion became more evident. Though having a lot of benefits digital finance faces certain issues also. Firstly, it relies heavily on internet connectivity and this problem becomes more severe at remote areas. Secondly, it provides no usage to people who have no mobile phone or digital services or even don’t have the knowledge to use it and this percentage is too high. With greater breach to digital data security and legal loopholes this platform is not well adapted.
Digital financial literacy is the need of the hour and when we are facing a lot of gaps due to regional, educational, economic, gender imagining greater inclusion and empowerment is a tedious task. Anshika, Dr. Anju Singla (2017) stated that the development and improvement of financial system of an economy depends on the financial literacy. At the time of demonetization, lots of hundreds of people round the country crowed ATMs and the bank branches, therefore showing that India has miles ahead to go before achieving a widespread state of digitization. Nation’s mission to a cashless, faceless, paperless economy is gaining thrust with an amazing growth in digital transactions over the previous few years but its impact cannot be felt by a large section of the population. This paper highlights the level, usage and potential of digital financial literacy and how it varies taking into account age, gender, education, and sector and different income levels.