Impact of UPI Adoption and Digital Payment Usage of Financial Inclusion: An empirical Study of Tamil Nadu State

Abstract

The rapid expansion of digital financial technologies has significantly transformed the financial ecosystem in India, with the Unified Payments Interface (UPI) emerging as a key driver of this transformation. This study examines the impact of UPI adoption and digital payment usage on financial inclusion, focusing on the state of Tamil Nadu. The primary objective is to analyze how digital payment systems contribute to enhancing access to financial services and promoting inclusive economic participation. The study adopts a quantitative research design based on primary data collected from 300 respondents using a structured questionnaire measured on a five-point Likert scale. The variables include UPI adoption and digital payment usage as independent variables, and financial inclusion as the dependent variable. Statistical tools such as reliability analysis, factor analysis, correlation analysis, and multiple regression analysis were applied using SPSS software. The findings reveal that both UPI adoption and digital payment usage have a significant and positive impact on financial inclusion. The reliability analysis indicates high internal consistency (Cronbach’s Alpha = 0.967), while factor analysis confirms a strong construct structure with three distinct components explaining over 72% of the total variance. Correlation results demonstrate a significant positive relationship between UPI adoption (r = 0.543) and financial inclusion, as well as digital payment usage (r = 0.554) and financial inclusion. Regression analysis further confirms that digital payment usage has a slightly stronger influence compared to UPI adoption. The study concludes that digital payment systems play a crucial role in enhancing financial inclusion by improving accessibility, convenience, and efficiency of financial transactions. The findings provide valuable insights for policymakers and financial institutions to design strategies that promote digital financial adoption and bridge the gap in financial inclusion.