Analysing the Effect of Digital Infrastructure on Card and E-Money Payments: A Longitudinal Data Analysis

In recent years, retail payment systems worldwide have undergone a significant transformation, shifting from predominantly cash-based payments to digital or cashless alternatives. Among these, cards are increasingly emerging as the preferred payment option with newer forms, such as e-money payments steadily gaining traction. The existing literature identifies several key determinants of this shift, one of which is digital infrastructure. Notably, many of the empirical studies confirming the significance of digital infrastructure in driving cashless payments are grounded in technology acceptance and diffusion models which generally apply survey-based measures of consumer technological behavior, typically for a single country. While these models provide valuable micro level information, they offer limited insights into the objective role of digital infrastructure in shaping payment behavior over time and across countries. This study addresses this gap by using a panel data for 44 countries over eight years to empirically examine the role of digital infrastructure in driving card and e-money payments. The analysis was carried out within a Fixed Effects framework, with digital infrastructure captured through a composite index constructed using Principal Component Analysis. The findings revealed that digital infrastructure significantly promotes card and e-money payments. The magnitude of the effect, however, varies by the prevailing level of card and e-money payments, with financial inclusion dampening the effect in countries where the payment level is low and reinforcing them where it is high. These findings highlight the importance of tailored policies in fostering the adoption of cashless payment.