A NEW ECONOMIC PERSPECTIVE: UNDERSTANDING THE IMPACT OF DIGITAL FINANCIAL INCLUSION ON INDONESIAN HOUSEHOLDS CONSUMPTION

The fifth wave of the Indonesian Family Life Survey (IFLS), conducted in 2014, is used to compile the cross-sectional data for this study. Information on household consumption on a per-person basis is used. This study investigates how people’s access to digital financial services influences their discretionary spending in Indonesia.We find that household spending increased alongside internet penetration. Our research suggests that low and middle-income families benefit the most from the accessibility to and convenience of digital finance. We conclude that digital banking positively affects consumer spending due to factors such as higher earnings, more opportunities for investment, less friction during financial transactions, higher levels of security, and looser liquidity requirements.