ANALYZING THE IMPACT OF FINANCIAL TECHNOLOGY TOWARDS FINANCIAL LITERACY AND FINANCIAL INCLUSION OF ITS MILLENNIAL USERS IN BANDUNG

• Main Author: Zakarias, Rizaldi
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/40986
• Institution: Institut Teknologi Bandung

The President of the Republic of Indonesia, Joko Widodo declares Financial Inclusion National Strategic to become a vision and basic guidance for institutions to increase the access for citizens toward formal financial institution and reach the 75% financial inclusion target in 2019. Amid the growing of financial technology, it is hoped that we could leverage that phenomenon to reach the target. This is an inevitable fact, Indonesians need to be equipped appropriately as it takes a holistic strategy in order to make that a success. As the fourth most populous country, Indonesia also has the potential to utilize its human capital as the cog in advancing economic growth. Demographic dividend that has been happening since 2012 until 2035 will have its peak during 2028 through 2030 (KOMINFO, 2014). In fact, during 2020 through 2030, the composition of the population in Indonesia will be 70% comprised of millennial or those who were born between 1981 to 2000 (Ali & Purwandi, 2017). However, all these opportunities would not be any benefit for a country, unless its people have the knowledge to harness it. That is when financial literacy is positioned to play an important role. Unfortunately, Indonesians do not possess adequate financial literacy since the index is only 28.9. It goes parallel with financial inclusion index with only 63.8 (OJK, 2017). Those numbers ironically only represent banking sector, while the gap among other financial sectors are significant. Therefore, in this research, researcher seeks to find the impact of financial technology towards financial literacy and financial inclusion of fintech millennial users in Bandung since this city is the capital city of West Java, which is the most populous province in Indonesia. Researcher employs simple weight method in calculating index of financial literacy and index of financial inclusion construct that is proposed by Sarma in 2008. This research also examines financial technology activities that are divided into transactional and informational as proposed by Yakobobski, Lusardi, and Hasler (2017). Afterwards, researcher runs multiple linear regression in checking the influence of financial technology activities toward the indices. By using 300 data that are obtained from millennial financial technology users in Bandung, it is found that the index of financial literacy of the respondents is 65.31, with the least comprehension in compounded interest and retirement planning. As for the areas they most comprehend are how to register for a bank account and fundamental financial asset concept. Based on the regression analysis, financial technology activities do not have significant relationship with financial literacy, both partially and simultaneously; Meanwhile, the index of financial inclusion of the respondents is 64.19, with the most financially excluded in such areas as e-money ownership, formal loans source, and use of micro financial institution. As for the areas they most financially included are debit card ownership, ATM as their most preferred source of cash, and use of their account when they need to pay or buy something. Based on the regression analysis, financial technology activities have significant relationship with financial inclusion, both partially and simultaneously.