Why people use digital payments: Evidence from Peru

This paper gives a first approach to explain the determinants of the usage of digital payments in Peru. For that purpose, we use the National Household Survey (ENAHO), which collects answers about ownership of accounts and cards, as well as the usage of different payment instruments (cash, credit card, debit card, electronic transfer, etc.) to make purchases in 9 product categories, between 2015 and 2018. We use a Heckman bi-probit model to correct the selection bias, since the usage of digital payments is observed only for the financially included people. The econometric results show that the usage of digital payments is more likely among people between 25 and 40 years old, with higher education, with formal employment, and who live in urban areas. Likewise, it is observed that the probability of paying digitally is reduced if the person belongs to the lowest quintiles of household spending per capita and increases if they live in a district belonging to the highest quintiles of presence of the financial system.