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Assessing Incentives to Increase Digital Payment Acceptance and Usage : A Machine Learning Approach

An important step to achieve greater financial inclusion is to increase the acceptance and usage of digital payments. Although consumer adoption of digital payments has improved dramatically globally, the acceptance and usage of digital payments fo...

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Bibliographic Details
Main Authors: Allen, Jeff, Carbo Valverde, Santiago, Chakravorti, Sujit, Rodriguez-Fernandez, Francisco, Pinar Ardic, Oya
Language:English
Published: World Bank, Washington, DC 2022
Subjects:
DIGITAL PAYMENT
FINANCIAL INCLUSION
ACCEPTANCE OF DIGITAL PAYMENT
CONSUMER PAYMENTS
INCENTIVES
FINANCIAL REGULATION
MACHINE LEARNING
PAYMENT SYSTEMS DEVELOPMENT GROUP
SHADOW ECONOMY
MICRO RETAILER
SMALL RETAILER
MEDIUM RETAILER
RETAIL TAX POLICY
MOBILE PAYMENT APP
Online Access:http://documents.worldbank.org/curated/en/099835305172210068/P16477006919c50ff0b5c803899c587e8ee
http://hdl.handle.net/10986/37487
Description
Summary:An important step to achieve greater financial inclusion is to increase the acceptance and usage of digital payments. Although consumer adoption of digital payments has improved dramatically globally, the acceptance and usage of digital payments for micro, small, and medium-sized retailers (MSMRs) remain challenging. Using random forest estimation, The authors identify 14 key predictors out of 190 variables with the largest predictive power for MSMR adoption and usage of digital payments. Using conditional inference trees, they study the importance of sequencing and interactions of various factors such as public policy initiatives, technological advancements, and private sector incentives. The authors find that in countries with low point of sale (POS) terminal adoption, killer applications such as mobile phone payment apps increase the likelihood of P2B digital transactions. They also find the likelihood of digital P2B payments at MSMRs increases when MSMRs pay their employees and suppliers digitally. The level of ownership of basic financial accounts by consumers and the size of the shadow economy are also important predictors of greater adoption and usage of digital payments. Using causal forest estimation, they find a positive and economically significant marginal effect for merchant and consumer fiscal incentives on POS terminal adoption on average. When countries implement financial inclusion initiatives, POS terminal adoption increases significantly and MSMRs’ share of person-to-business (P2B) digital payments also increases. Merchant and consumer fiscal incentives also increase MSMRs’ share of P2B electronic payments.

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