Digital Payment Systems and Financial Inclusion in Rural India: A Pre-Pandemic Baseline Study

Abstract

Before the COVID-19 pandemic catalyzed an unprecedented wave of digital adoption, rural India had already embarked on a transition towards digitized financial transactions, driven by initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY), the Aadhaar-enabled Payment System (AePS), and mobile-based banking solutions. This study explores the state of digital payment systems in rural India before the onset of the pandemic, providing a critical baseline to understand the progress and gaps in financial inclusion. By surveying 1,200 households across Bihar, Rajasthan, Maharashtra, and Tamil Nadu and analyzing secondary datasets, the paper investigates the socio-economic, infrastructural, and behavioral factors influencing the adoption and usage of digital financial services. The findings reveal substantial regional disparities in access and adoption, underscoring the role of education, mobile ownership, gender, and internet connectivity. This baseline analysis serves not only to map the pre-pandemic landscape but also to guide post-pandemic digital strategies aimed at inclusive financial growth.