Research Insights: Does Adopting Digital Payment for Cash Transfers Improve the Financial Inclusion and Financial Well-Being of Low-Income Households?

Switching from cash to direct deposits of recurrent government benefits into digital bank accounts reduces disbursement errors and increases access to benefits among eligible beneficiaries. Switching to direct deposits increases ownership of bank accounts, demand for formal loans, and ownership of loans from commercial banks among individuals without a financial history. Individuals without a financial history are less responsive to government encouragement to switch to direct deposits, even though adopting the technology has large potential benefits. There is no evidence of substantial or significant effects on savings, spending, trust in financial institutions, and other measures of financial well-being.