The Behavioral Role of Digital Economy Adaptation in Sustainable Financial Literacy and Financial Inclusion.

The basic aim of this research was to investigate the impact of the behavioral biases on financial inclusion in Pakistan while considering the moderating effect of financial literacy in this relation, in the context of behavioral perspective. This study focused on the significant behavioral phenomenon, including self-control, optimism, herding, and loss aversion with a perspective of the digital economy. To test the proposed hypothesis, the primary data collection method was used. A structured questionnaire was designed to collect data from 102 individual households through the convenience sampling technique. SmartPLS was used to analyze collected data. This study found the negative impact of self-control, optimism, and herding on financial inclusion. In contrast, loss aversion contributes to the uplift of financial inclusion in Pakistan. Similarly, financial literacy proved to have a decreasing effect on financial inclusion because of religious concerns. The moderation effect of financial literacy was also significantly positive except for loss aversion. The behavioral phenomenon proved to have a significant impact on financial inclusion. This research shows that individual households who do not use developed technological services and products from formal financial inclusion can overcome the behavioral biases that hinder them from making informed financial decisions. This research work will significantly help households use financial services to improve their standard of living and overall long-term financial well-being. This research is essential because many households are not using bank services and have low financial knowledge in Pakistan. The key contribution of this research study is that it found the relation between behavioral factors and financial inclusion. Financial literacy also has a moderating effect on their relations.