A Methodological Overview to Defining and Measuring “Digital” Financial Literacy

28 Pages Posted: 29 Apr 2021

See all articles by Angela Lyons

Angela Lyons

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Josephine Kass-Hanna

University of Saint Joseph (Beirut) - Faculty of Business Administration and Management

Date Written: April 28, 2021

Abstract

Researchers and financial practitioners alike recognize the importance of defining and measuring financial literacy (FL) to better understand its relationship to financial behavior and decision-making. Despite many efforts, there is still no widely accepted definition or methodological approach for measuring FL. The rapid expansion of digital financial services (DFS), which promises to enhance financial inclusion and improve personal financial management, has brought to light a new challenge: linking FL to digital literacy (DL) and assessing their dual effect on financial outcomes. Recent research has even proposed a framework to operationalize the emerging concept of digital financial literacy (DFL), as traditional FL definitions and metrics have become insufficient to capture the specificities of financial services within a digital context. This survey article discusses empirical research techniques being used to assess FL, DL, and most recently DFL. It highlights the characteristics and limitations of these approaches and suggests ways to address some of the challenges related to the construction, testing, weighting, and standardization of multidimensional measures, as well as methodological issues related to modeling and estimation. The article is a helpful guide to researchers and practitioners interested in FL in general and in the emerging concept of “digital” financial literacy.

Keywords: financial literacy, digital literacy, digital financial literacy, measurement, multidimensional indices, methodological issues

JEL Classification: D1, D14, G4, G5, G53

Suggested Citation

Lyons, Angela and Kass-Hanna, Josephine, A Methodological Overview to Defining and Measuring “Digital” Financial Literacy (April 28, 2021). Available at SSRN: https://ssrn.com/abstract=3836330 or http://dx.doi.org/10.2139/ssrn.3836330

Angela Lyons (Contact Author)

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
Urbana, IL 61801
United States
1-217-244-2612 (Phone)

Josephine Kass-Hanna

University of Saint Joseph (Beirut) - Faculty of Business Administration and Management ( email )

Campus of Social Sciences, Huvelin Street
P.O. box 17-5208 Mar Mikhael
Beirut, 1104 2020
Lebanon
+9611421000 (Phone)

HOME PAGE: http://www.usj.edu.lb/

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