The Impact of Digital Payment Adoption on Financial Inclusion in Salem and Erode Districts of Tamil Nadu

The rapid proliferation of digital payments in India, catalysed by the Unified Payments Interface (UPI), has fundamentally reshaped the financial landscape, promising greater financial inclusion. This study investigates this impact within the specific socio-economic context of Salem and Erode districts in Tamil Nadu, which are major hubs for trade, textiles, and Micro, Small, and Medium Enterprises (MSMEs). A mixed-methods approach was employed, administering a structured questionnaire to 250 respondents—including students, salaried employees, and MSME entrepreneurs—and conducting follow-up semi-structured interviews with 15 participants. The findings reveal that digital payments, particularly UPI, have significantly enhanced financial inclusion by improving accessibility, transaction speed, and transparency, leading to increased formal banking participation. However, persistent barriers such as cybersecurity apprehensions, digital illiteracy, and unreliable internet connectivity in semi-urban and rural pockets continue to impede universal adoption. Regression analysis confirmed a strong positive correlation (r = 0.64, p < 0.01) between digital adoption and financial inclusion metrics. The study concludes that while digital payments are a powerful tool for inclusion, a multi-stakeholder approach focusing on digital literacy, infrastructure development, and robust security frameworks is essential for realizing its full potential.