Why people use digital payments: Evidence from micro data in Peru

Financial inclusion and digital payment use remain low in Peru. There is extensive literature on the determinants of deposit account access as a measure of financial inclusion, but few studies focus on digital payment use, and none addresses the Peru case at the micro level. This paper uses data from Peru's 2015-2018 National Household Surveys (ENAHO) on the ownership of deposit accounts and payment cards at the individual level and on the use of payment instruments (i.e., cash, credit cards, debit cards, mobile/Internet banking, etc.) for purchasing nine different product categories. Our results show that use of digital payments (e.g., credit card, debit card, or mobile/internet banking) is more likely among people between ages 25-40, with higher education levels, formal employment, and those living in urban areas or with Internet access. In addition, the likelihood of paying with digital instruments increases for people in the top quintiles of per capita household spending and those living in areas with a high presence of financial institutions. Furthermore, we extend the analysis of the determinants for using digital payments across product category and over time (2015-2018). Finally, our work may contribute to understanding the consequences of the COVID-19 pandemic and designing policies related to financial inclusion and digital payment use.