Digital Banking Adoption and Financial Inclusion among Rural and Urban Populations in Karnataka: An Empirical Study
DOI:
https://doi.org/10.64137/31079423/IJEBMR-V2I3P117Keywords:
Digital Banking Adoption, Financial Inclusion, Customer Attitude, Digital Financial Literacy, Trust, Rural–Urban DivideAbstract
Digital banking has emerged as an important mechanism for extending access to formal financial services and strengthening financial inclusion, particularly among populations facing geographical and socioeconomic barriers. This study examined the factors influencing digital banking adoption and its contribution to financial inclusion among rural and urban populations in Karnataka. The study adopted a quantitative, cross-sectional and explanatory research design and analysed primary data collected through a structured questionnaire from 600 respondents, comprising 300 rural and 300 urban respondents from Bengaluru Urban, Mysuru, Davanagere, Tumakuru and Mangaluru. The constructs were measured using a five-point Likert rating scale, and the data were analysed using descriptive statistics, Cronbach's alpha, Composite Reliability, Confirmatory Factor Analysis (CFA), Average Variance Extracted (AVE), Heterotrait–Monotrait (HTMT) analysis and Structural Equation Modelling (SEM) using AMOS. The results revealed that Perceived Usefulness (β = 0.28, p < 0.001) had the strongest positive influence on Customer Attitude, followed by Perceived Convenience (β = 0.25, p < 0.001), trust (β = 0.21, p < 0.001), Digital Financial Literacy (β = 0.19, p < 0.001), Perceived Ease of Use (β = 0.17, p = 0.002) and Perceived Security (β = 0.14, p = 0.008). Customer Attitude significantly influenced Digital Banking Adoption (β = 0.67, p < 0.001), while Digital Banking Adoption strongly influenced Financial Inclusion (β = 0.72, p < 0.001). The model explained 68% of the variance in Customer Attitude (R² = 0.68), 45% in Digital Banking Adoption (R² = 0.45), and 52% in Financial Inclusion (R² = 0.52). The rural–urban multi-group analysis showed that the relationship between Digital Banking Adoption and Financial Inclusion was stronger among urban respondents (β = 0.78) than rural respondents (β = 0.65), with a significant difference (p = 0.021). The findings demonstrate that digital banking adoption can significantly contribute to financial inclusion, while usefulness, convenience, Trust, security and digital financial literacy are important in developing favourable customer attitudes and promoting effective digital financial participation.
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